Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Why reversal is needed
ITC is meant to offset tax on a taxable supply. When goods are given away as samples or gifts, or are lost, stolen, destroyed or written off, there is no outward supply — so under Section 17(5) the credit you claimed on those inputs must be reversed (paid back).
How and when
You compute the ITC attributable to those goods and add it back in your GSTR-3B for the period the event occurs, with interest if it relates to an earlier claim. This commonly arises for expired stock, breakages, promotional giveaways and damaged goods. Some promotional schemes have nuanced treatment — confirm for your case.
A worked example
Example: a pharma distributor gives away ₹5 lakh of sample medicines and writes off ₹1 lakh of expired stock. The ITC originally claimed on both — say ₹72,000 in total — must be reversed. Tracking samples and write-offs through the year avoids a nasty reconciliation (and interest) at audit. Note this is different from a genuine discount, which doesn’t require reversal. Our team can identify reversals you owe.