Section 17(5) of the Central Goods and Service Tax Act 2017, says that notwithstanding anything contained in section 16(1) or section 18(1), input tax credit shall not be available for certain inputs or input services.
Clause (h) of the said sub-section talk about the input tax credit not available on “goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples”
Now question arise that whether input tax credit on inputs which has been wasted or lost during manufacturing process or during the production can be said that “goods lost or destroyed and input tax credit would not be available because of section 17(5) (h) of the Act.
As per section 16(1) of the Act very registered person shall be entitled to take input tax credit on any supply of goods or services or both provided such goods or services is used or intended to be used in the course or furtherance of business and such amount of credit is credit to the electronic credit ledger.
Therefore input tax credit can be taken if:-
(1) Person availing credit is registered person
(2) Such goods/service used or to be used in the course of Business or further of the Business, and
(3) amount of credit has been credited in electronic credit ledger of the such person
A business hope to get a semi finished or finished product when any goods or service is put/applied into manufacturing process however sometimes process will not result what is expected and such goods may be lost or damaged during manufacturing process, it may be standard process loss or sometimes more than that, but it shall be deemed to be used in the course of business as it is already used or put in to business and it can never be said that it was not used in the course business, it is totally different from the goods lost or destroyed as envisaged in section 17(5)(h) of the Act.
Thus it is my understanding the input tax credit can be taken on such goods lost and it will not attract the provision of section 17(5)(h) of the Act .