A company dealing in apparel has supplied goods to modern trade like big bazaar, reliance retail, metro etc in FY 2018-19. Such unsold products after sales are returned by the customer back to the company.
In the above case, at the time of return of goods back to the company, credit note was issued against multiple tax invoice. Since in the FY 2018-19, there was no provision in GSTR1 to report credit note without reference of original invoice, the company claimed ITC on such sales returns. Now the department is seeking reversal of ITC claimed as ineligible. What are the remedies to the same?
Apparel Company Faces ITC Reversal for FY 2018-19; Debate Over Section 16(2)(a) and Revenue-Neutral Claims A company in the apparel sector issued credit notes for unsold goods returned by customers in FY 2018-19, claiming Input Tax Credit (ITC) on these returns. The tax department now seeks reversal of the claimed ITC, deeming it ineligible. Respondents suggest that while the department's view aligns with Section 16(2)(a), the issue is revenue-neutral, and procedural errors should not impact the revenue. Some advise showing relevant documentation to justify the credit, while others suggest pursuing refunds or referencing case law. Resolution will likely occur in appellate forums due to procedural complexities. (AI Summary)
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