Question

XYZ(Manufacturer) had transferred the goods from factory to warehouse in Excise Regime by paying Excise and they are still lying there.
1) Now if they divert these goods to other customers, can they pay GST on sales price even if sale price is less than purchase price?
2) If they scrap this material, do they need to reverse the CENVAT credit availed in the excise regime on the inputs used for manufacturing these pumps or can pay GST on sales value of scrap.
3) If they write off this inventory in books of accounts, do they need to reverse CENVAT credit availed in the excise regime on the inputs used for manufacturing these goods?

Answer

Facts of the case: Goods were transferred to warehouse under excise regime. Excise was paid.

Law relating to case:
1. The warehouse shall be registered as additional POB under GST.
2. Excise paid shall now be converted to ITC of GST, by virtue of Trans-1, and shall be governed by GST laws.

Conclusion: To answer your questions;
1. GST is applicable on value derived at as per section 15. It has nothing to do with sale price being lower than purchase price (except under rule 32(5)). GST will be applicable normally whether purchase price is lower than, equal to or higher than purchase price.
2. If the finished goods are scrapped then this is a taxable supply attracting GST on scrap sales. Since this is a taxable supply no reversal of ITC is needed.
3. If the finished goods are written off/destroyed then this would mean that the inputs were not used to make a taxable supply. Hence in accordance section 17 read with relevant rules the ITC shall be reversed by adding it to output tax liability.  (Reply dt.13/03/2019)