The ITC (Input Tax Credit) treatment in the case of the return of time-expired goods that are destroyed by the manufacturer

In this article we will know that if the goods have expired, that is why the goods are returned to the manufacturer by the retailer/wholesaler. After that, if the manufacturer has destroyed the goods, then what will be the treatment related to ITC in this case.

Circular No. 72/46/2018-GST dated 26.10.2018 has clarified such situation.

In this case, the ITC availed by the manufacturer at the time of return of goods will have to be reversed. It does not matter how much ITC was availed on that product at the time of manufacturing, it has to be ignored.

We understand this with an example:-

Let us assume that the manufacturer had availed ITC of Rs 10,000 on that product at the time of manufacturing the goods. When the goods were returned, a fresh invoice was issued and GST of Rs 15,000 was charged on those goods and the manufacturer availed ITC on it.

In that case, whenever the goods are being destroyed, the ITC of Rs 15,000 will have to be reversed and not the ITC of Rs 10,000. It does not matter how much ITC was availed on that product at the time of manufacturing, it has to be ignored.

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