Reversal of ITC required on inputs contained in finished/intermediate goods if destroyed in fire: Gujarat AAR
Authority for Advance Rulings, Gujarat Jay Chemical Industries Ltd., In re – [2021] 124 taxmann.com 412 (AAR – GUJARAT)
Short Overview :
The applicant company was engaged in manufacturing and marketing of dyes and dye intermediates.
It was also consuming these dye intermediates as an intermediate product in its manufacturing process and also selling dye intermediates in market.
A fire broke out at one of units of applicant and raw material; intermediate/finished goods of certain amount were destroyed.
It filed an application for advance ruling to determine whether it would be required to reverse input tax credit on inputs consumed in dye intermediates which were also finished goods), where such goods were destroyed in fire.
The Authority for Advance Ruling observed that in GST regime, the scope of definition of inputs, capital goods and input services is very wide and covers almost all the imaginable goods and services that are directly or indirectly used in course or furtherance of business.
However, Section 17(5) of the CGST Act, 2017, input tax credit (ITC) shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
Since, the said inputs were used in manufacture of finished goods that had been destroyed; the same were not used in course or furtherance of business.
Therefore, it was held that ITC taken on the inputs used in the manufacture or production of goods i.e. intermediate dye and the ITC taken on input services used in or in relation to the manufacture or production of said goods shall be reversed.
