Whether itc should be reversed in case of goods sold as scrap due to breakage at a very low rate as compared to actual selling price? (For eg actual selling price of product Rs 500 but scrapped at Rs 1)

Reply—Clause (h) of sub-section (5) of section 17 of the said Act provides that ITC shall not be available in respect of goods lost, stolen, destroyed, Written off or disposed of by way of Gift or free samples. In the above case, if taxpayer wants to write off dead stock, ITC is need to be revered as per above provision.

ITC of part of goods which have resale value would not lead to reversal as per above section. In our opinion even if the goods are sold at scrap value, ITC needs to be reversed. It may be a debatable issue.