If there is a trading business and goods worth Rs. 1,00,000/- were damaged by rain which was covered under insurance. Insurance claim of Rs. 60,000/- was received as balance of goods worth Rs. 40,000/- are resalable. Whether ITC has to be reverse? And what would be the respective adjustments under books and GST?

Section 17(5)(h) provides restrictions in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples, Accordingly, if the part of the value of the goods are destroyed but not entire goods, no ITC needs to be reversed as goods are not destroyed but damaged. However, where the goods are completely damaged (not in their original form), in such cases, ITC needs to be reversed. In all cases, the trader needs to pay tax on sale value of the goods which are sold as damaged or destroyed (whether as deteriorated or scrap).