TaxTMI 
TaxTMI 
If a taxable person procures inputs and after 3 years, returned the same i.e. purchase return, would he be required to reverse the ITC on such inputs in terms of Section 17(1) such goods not being used for affecting taxable supplies?
Eligibility of ITC
22 Mar 2024 
9 Replies 
1234 Views Asked by
Input tax credit reversal on purchase returns may be required when goods are no longer used, with invoice or credit-note options.
Whether ITC must be reversed when goods are returned after an extended period hinges on the entitlement test that credit is available only for inputs "used or intended to be used"; options include treating the movement as a fresh taxable supply with a tax invoice to enable the original seller to claim credit, or treating it as a purchase return with a commercial adjustment excluding tax where statutory time limits prevent a formal credit note, while factual circumstances may instead characterize the transfer as a resale. (AI Summary)
Whether ITC must be reversed when goods are returned after an extended period hinges on the entitlement test that credit is available only for inputs "used or intended to be used"; options include treating the movement as a fresh taxable supply with a tax invoice to enable the original seller to claim credit, or treating it as a purchase return with a commercial adjustment excluding tax where statutory time limits prevent a formal credit note, while factual circumstances may instead characterize the transfer as a resale. (AI Summary)