Dealer (A Ltd) has purchased capital asset (textile machinery) on 01.08.2017 for Rs. 1 crore and paid GST thereon at 18%. Dealer (A Ltd) has claimed ITC of 18,00,000/- on the said machinery in books as well as GSTR 3B. However, the machinery is not performing up to expectation. Hence, Dealer (A Ltd) negotiates with the supplier for returning the machine. On 01.04.2020, supplier takes machine back (goods returned). Supplier issues commercial credit note for Rs.50 lakhs without reversing GST. GST cannot be reversed as time permitted under section 34 has lapsed. Does dealer (A Ltd) who is returning machinery have to reverse ITC availed by him in books as well as GSTR3B? If yes, how much ITC shall be reversed?
Ans. Yes, ITC needs to be reversed in case of removal of capital goods before the specified period of 5 years as purchase return. In such cases, it is advisable that a sale invoice be issued in the name of original supplier by the buyer at the time of returning goods. Changed laws require changed dynamics of business also. One cannot live with the old practices. When timelines have been prescribed for all actions in law, one must adhere to the same and should specifically mention in his contracts that in case such time lines are not met, the damage would be borne by the party at whose default the tax has been lost.
. Learn how to calculate and comply with the GST input tax credit reversal on such transactions.){kind=link}