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GST UPDATE ON 66th ON ITC RELATED TO EXPIRED FOOD PRODUCTS

GST UPDATE ON 66th ON ITC RELATED TO EXPIRED FOOD PRODUCTS
Availability of ITC on expired food items is a crucial matter as there is specific provision under section 17(5)(h) of the CGST Act, 2017 as regards non-availability of input tax credit on goods destroyed by the assessee. Recently, the issue as regards admissibility of ITC on expired cakes and pastries was raised before the Hon’ble Gujarat AAR in the case of KANAYALAL PAHILAJRAI BALWANI wherein it was ruled that cakes and pastries whose shelf life has expired and returned to the manufacturer by the bakery/ retailer will be considered as goods destroyed by manufacturer and therefore, ITC on the same have to be reversed by the manufacturer as per Sec 17 (5)(h) of CGST Act,2017. The applicant sought the advance ruling on the matter of whether ITC will be available on raw material used in manufacturing of expired cakes and pastries which was given to the distributors for display as it is used in course of furtherance of business. Gujarat AAR placed reliance on the clarification issued vide the circular no. CBEC/20/16/04/2018-GST which is related to expired drugs and medicines as the situation is very much similar to the present case. Circular provides that while destroying the expired goods returned by the retailer, the manufacturer has to reverse the ITC taken on inputs used in such expired goods. Reference was also made to the provision contained in section 17(5)(h) of the CGST Act, 2017. In nutshell, goods having shelf life when returned back to the manufacturer and are thrown away by him, ITC related to input is required to be reversed by the manufacturer irrespective of the fact that goods were used in course or furtherance of business. However, in the erstwhile Central Excise Laws, the normal loss incurred during the course of manufacturing of goods was allowed and no credit was required to be reversed on the same. In the present case, the display cakes being perishable in nature are also normal loss for the business and ideally, ITC should be allowed as the same are used in course or furtherance of business.

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