ITC of inputs used in manufacturing cakes & pastries which were expired has to be reversed: AAR

Case details: Authority for Advance Rulings, Gujarat Kanayalal Pahilajrai Balwani, In re - [2021] 130 taxmann.com 209 (AAR - GUJARAT)

Judiciary and Counsel Details

• • Sanjay Saxena and Arun Richard, Member
  • Pravin Sahu, CA for the Applicant.

Facts of the Case

The applicant was engaged in the business of manufacturing & distribution of cakes & pastries items. The cakes & pastries were of perishable nature and cannot be preserved for longer period and on regular interval all cakes & pastries kept in display have to be compulsorily replaced after expiry. It filed an application for advance ruling to determine whether there would be requirement for reversal of input tax credit on goods used as raw material in manufacturing of expired cakes & pastries that were kept in display for use in course or furtherance of business.

AAR Held

The Authority for Advance Ruling observed that the applicant would throw away the expired Cakes & Pastry. As per Section 17(5)(h) of CGST Act, 2017, input tax credit shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Moreover, as per Circular No. 72/46/2018-GST dated 26-10-2018, it was clarified that if time expired goods would be destroyed then the taxable person would be required to reverse the ITC attributable to the manufacture of such goods. Therefore, it was held that ITC on inputs used in manufacturing expired cakes & pastries was not admissible and required to be reversed.