ITC on Destroyed Goods amid COVID 19

India is under Lockdown since 25 March, 2020 due to Covid 19 Crisis. And it seems that ITC under GST is one of the aspect that has been affected in the presence of lockdown.

Let us understand whether ITC availed on Goods which have expired or destroyed amid the Corona Virus Pandemic needs to be reversed or not as per the provisions of GST.

Case Scenario :

There may be various instances where manufacturers may have purchased raw materials in order to make the finished goods. But now amidst the lockdown the said goods/material have been destroyed or expired or gone bad or is not suitable for making the finished Product.

Thus the said goods/material cannot be sold in the form of finished product in the said event.

And here lies the problem that the said taxpayer has availed the Input Tax Credit on the same.

So, let us head to 17 of CGST Act, 2017 :

(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:—

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; 

Conclusion :

Section 17(5) of CGST Act, 2017 clearly states that if goods lost stolen or destroyed or written off or dispose of by gift or free sample you cannot claim ITC.

Thus in the present scenario the Goods have been destroyed and thus ITC needs to be reversed.

The views expressed by the author is based on his understanding of law and the prevailing circumstances. Taxpayers are requested to use the views judiciously and author shall not be liable for any gain/loss which might arise by referring his article.

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