ITC is not allowed on expired cakes and pastries and must be reversed
On Millisecond. KANAYALAL PAHILAJRAI BALWANI, (SIDARTH FOODS) [ADVANCE RULING GUJ/GAAR/R/16/2021 dated June 30, 2021], Millisecond. Kanayalal Pahilajrai Balwani (“the Applicant”) You have requested an advance ruling on whether or not there is a requirement for the reversal of the input tax credit (“ITC“) in products used as raw material in the manufacture of expired cakes and pastries that were kept on display for use in the course or commercial promotion.
In this case, the Applicant has been involved in the cake and confectionery manufacturing and distribution business. Applicant sends cakes and pastries to distributors to keep them on display and fascinate consumers. The cakes and pastries are perishable in nature and cannot be kept for a longer period and at regular intervals, all cakes and pastries that remain on the display must be obligatorily replaced after the expiration of said bakery item. The Applicant states that the exhibition helps them achieve the objectives of continuing the cake and pie manufacturing and sales business in the future as well.
The Applicant clarified that these are not free or sample and are delivered to the distributor with a tax invoice. In addition, after expiration when these are returned to the Applicant, it evaluates the issuance of credit notes for that. In addition, the applicant clarified the manner of disposal of the expired cakes and pastries, to which the applicant claimed that the expired ones are thrown away.
The honorable Gujarat Authority to rule in advance (“the GAAR“) given the ruling in light of the provision of circular No. 72/46/2018-GST dated October 26, 2018 that prescribed “when expired goods, which have been returned by the retailer / wholesaler, are destroyed by the manufacturer, he / she is obligated to reverse the ITC attributable to the manufacture of said goods in terms of Section 17 (5) (h) of the CGST Law (“CGST Law“).. ”The circular has also mentioned that, although the scenarios in relation to the return of goods due to expiration are analyzed,“ it may be applicable to those other scenarios in which the goods are returned for other reasons ”.
the GAAR pointed out the fact that all expired cakes and pastries are thrown away after their shelf life. “We consider the act of throwing out expired cakes and pastries to be similar to destroying expired food products, as the applicant destroys by throwing them away,” he said, while this scenario is similar to treating expired drugs.
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