Whether ITC is to be reversed on Inputs if Finished Goods billed but not delivered to recipient is Destroyed in Fire

[Ramesh Kumar]

Dear experts,

My query is whether ITC is required to be reversed on inputs if finished goods which were billed to customer, but were destroyed in fire accident before delivery.

In this case, the party has already billed the finished goods and consideration is received including GST. Below are the different scenarios I am seeking a clarity.

1. Goods billed but not delivered. Consideration not received. Is ITC to be reversed on inputs.

2. Goods billed, consideration received, but goods not delivered. Is ITC to be reversed on inputs.

3. Has supply happened just by raising invoice and receiving consideration, without actual delivery of goods?

4. If details of inputs used for finished goods destroyed during fire are not available, can Department raise demand on the basis of value of the finished goods or insurance claim received on those goods @18%?

Please put some light on the above issues.

AI Summary

Reversal of input tax credit required when invoiced goods are destroyed; insurance tax recovery must be deposited or ITC reversed.
Raising an invoice and receiving payment do not alone establish supply; a credit note can negate supply. When finished goods are destroyed, ITC attributable to inputs in those goods constitutes blocked input tax credit and must be reversed. If an insurer remits a tax component for the destroyed goods, that tax must be deposited with the government; absent such recovery, the originally claimed ITC on those inputs must be reversed.