EXAMPLE-104

Ram Ltd (trader) purchased goods of Rs 2 lakh in the month of May on which GST is paid of RS 20000. In the month of September goods worth Rs. 10000 were broken and written off in books of accounts. Balance Goods valued at Rs 190000 were sold in routine course. However, Ram availed credit of whole amount of input tax i.e. Rs 20000 paid on input of Rs 200000 in the month of May.

What consequence the company has to face.

Answer

Section 17(5)(h) specifies that input credit in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples shall not be available.

In view of the above provision, Input tax credit accountable to written off goods would be reversed. Thus, the credit of amount Rs 1000(20000/200000 *10000) shall be added to output tax liability.