SME Chatroom: Destruction of goods warrants reversal of input tax credit

Submit copies of correspondence with the buyer to the bank explaining the reasons for the inward remittance

Q. We have manufactured certain goods against an order from a foreign buyer. Now he does not want the material for some reason, but is agreeing to compensate us for the cost of manufacturing. We have to destroy some raw material (18 per cent GST) and finished goods (12 per cent GST). What should be the treatment under GST? Will the reversal be on input or output? What documents should be provided to the bank for receiving payment?

As per Section 17(5)(h) of the CGST Act, 2017, input tax credit will not be available on goods lost, stolen, destroyed, written