ITC on inputs used in manufacturing of cakes and pastries which subsequently expired is not admissible and required to be reversed – Gujarat AAR

M/s Kanayalal Pahilajrai Balwani [ADVANCE RULING NO. GUJ/GAAR/R/16/2021 (IN APPLICATION NO. Advance Ruling/SGST&CGST/2020/AR/42) (A.A.R. – GST – Gujarat)]

In this case, the Authority for Advance Rulings, Gujarat observed that the cakes and pastry have limited shelf life and after expiry these bakery items are prohibited from sale. The act of throwing away expired cakes and pastries is akin to destroying the expired food products, for the applicant destroys by throwing them away. Further, the AAR observed that as per Section 17(5)(h) of the CGST Act, 2017, “input tax credit is not available in respect of the goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples”. The said sub-section overrides the operation of Section 16 and Section 18 of CGST Act provisions contrary to this sub-section and thereby blocks ITC admissibility contrary to the said sub-section.

The AAR held that in the present case goods being destroyed are covered under this non obstante clause (h) of Section 17(5) of CGST Act thereby input tax credit on inputs used in manufacturing expired cakes & pastries is not admissible and required to be reversed.

To read the complete judgment 2021 Taxo.online 1414