Implication of inventory graded inventory write off vis-a-vis Section 17(5)(h)

[Raam Srinivasan Swaminathan Kalpathi]

A retail store has a policy of write down of the value of its old inventory at the end of each reporting period. At the end of the first year - inventory carried over is reduced by 30%, second year 50% and by the end of the third year 100% of the inventory is written off. My query is - when will the provisions of Sec.17(5)(h) kick in? Do we have to indulge in proportionate reversal of availed ITC or should the ITC availed be reversed only when the inventory is fully written down to zero?

Secondly, suppose the retail store is able to sell some of the inventory written off, what would be the treatment of the ITC already expunged?

Thanks

AI Summary

ITC reversal on inventory write-off under GST: staged stock write-downs raise questions on proportional reversal and later sale treatment. Treatment of ITC reversal under the GST restriction for goods disposed of by way of write-off or similar reduction in inventory value, where a retail store writes down old stock in stages over successive reporting periods. The issue is whether the restriction applies progressively on a proportionate basis as inventory is written down, or only when the inventory is fully written off to zero, and at what point the availed input tax credit must be reversed.