ITC reversals requirement:

[Anurag Chopra]

ITC reversals requirement:

During the year, Company XYZ had some losses/ inventory written off in the books of accounts. Post audit, it was established that such losses/ write offs were booked due to technical glitch in the SAP.

The said inventory was found physically available during the year end physical inventory count, but the issue is some of it is obsolete and some of it outdated (would be sold at much lower prices).

The issue here is that GST department is asking for reversals/ interest from the time inventory was written off in books.

Our point of view is that first inventory was inadvertently written off in books (via SAP glitch) and later was found available physically. Also, the inventory is being sold at written down value now as scrap etc. so the conditions of written off never arises in our case, therefore, no requirement of ITC reversal.

Is there any requirement for ITC reversal in above scenario. Also, any case law etc. which might help us in above case.

AI Summary

Inventory Accounting Discrepancy: SAP Glitch Challenges GST Input Tax Credit Reversal Claim A company experienced a technical glitch in SAP that erroneously wrote off inventory, which was later found physically available during year-end stock count. Some inventory is obsolete and will be sold at lower prices. The GST department demands ITC reversals and interest, but the company argues no reversal is required since the inventory exists and will be sold. Legal analysis suggests ITC reversal may not be necessary due to physical availability of goods and intent to make taxable supplies, with potential support from past tax regime rulings.