In re Geekay Wires Limited (GST AAAR Telangana)
In the case In re Geekay Wires Limited, the GST Appellate Authority for Advance Ruling (AAAR) Telangana addressed whether Input Tax Credit (ITC) availed on inputs used in manufacturing finished goods, which were later destroyed in a fire, must be reversed. The AAAR upheld the earlier Advance Ruling Authority’s decision, requiring the reversal of ITC for such destroyed goods based on the provisions of Section 17(5)(h) of the GST Act.
Legal Provisions Examined
Section 17(5)(h) of the GST Act specifies that ITC is not available for goods that are “lost, stolen, destroyed, written off, or disposed of by way of gift or free samples.” The authority noted that this provision overrides Section 16(1), which broadly allows ITC on goods used in the course or furtherance of business. The non-obstante clause in Section 17(5)(h) makes it clear that ITC claims on destroyed goods must be reversed, irrespective of their intended use in business.
Appellant’s Argument and Precedents Cited
The appellant argued that ITC should not be reversed for inputs used to manufacture finished goods, even if those goods were subsequently destroyed in a fire. They referred to a ruling by the Maharashtra Authority for Advance Ruling (AAR) in General Manager Ordnance Factory Bhandara (2019), where it was held that inputs cease to exist once used in manufacturing and cannot be considered destroyed. The AAAR distinguished this case, noting that it dealt with goods destroyed during testing, not goods lost in natural or man-made disasters.
