QUESTION

Mr. A has a machinery on which ITC was availed got damaged for which he will claim insurance. For example value of machinery 100000/- 18% 18000/- ITC availed. As per the section 17(5)(h) he has to reverse ITC Q: If a valuer decide claim of damaged machinery amount INR 80000/- does he require to reverse INR14400/- ITC availed or total ITC 18000/-.

ANSWER

FACTS OF THE CASE:

ITC of 18,000 was claimed on the machine which was subsequently damaged. Currently the machine is valued at 80,000.

LAW APPLICABLE:

As per section 16(1) of CGST;

"(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person."

INTERPRETATION:

As per section 16, ITC can be claimed if goods are used in course or furtherance business if the same are utilized in making a taxable outward supply.
Therefore the machine is salvaged and sold at 80,000 on a taxable invoice and GST is charged on the same then, no ITC reversal will be required.

CONCLUSION:

If the machine is sold on issue of a tax invoice then ITC reversal is not required. (Reply dt. 05/01/2022)