HOW TO ACCOUNT FOR EXPIRED OR DAMAGED STOCK IN BOOKS AND GST RETURNS
HOW TO ACCOUNT FOR EXPIRED OR DAMAGED STOCK IN BOOKS AND GST RETURNS
[Karawal Nagar | North East Delhi | GST Consultants in Delhi]
In businesses dealing with physical goods—such as pharmaceuticals, FMCG, or retail—it's common to face issues of expired, damaged, or mishandled stock. These situations require proper accounting treatment and GST input tax credit (ITC) reversal, to remain compliant with tax laws and maintain financial accuracy.
This blog by CHHABRIA ASSOCIATES, your trusted GST consultant in Karawal Nagar, Delhi, explains the step-by-step process to handle such cases—both in your books of account and GST filings.
1. Accounting Treatment of Expired or Damaged Inventory
When inventory is no longer usable or sellable due to expiry, mishandling, or breakage, it should be written off from your financial books.
Journal Entry in Tally or Any ERP:
Dr. Loss on Expired/Damaged Goods A/c XX,XXX
Cr. Inventory A/c XX,XXX
- The above loss will be shown under Indirect Expenses in the Profit & Loss Account.
- If the stock is covered under insurance and a claim is received, the entry will be adjusted accordingly.
Entry When Insurance Claim is Received:
Dr. Bank A/c Claim Amount
Dr. Loss on Damaged Stock A/c Remaining Loss
Cr. Inventory A/c Total Value of Stock
Tip from CHHABRIA ASSOCIATES: Always maintain documentation like damage reports, photos, and claim documents for audit trail.
2. GST Implications – Input Tax Credit (ITC) Reversal
Under Section 17(5)(h) of CGST Act, 2017, input tax credit is not available on:
"Goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples."
This means, if ITC has been claimed earlier on such goods, it must now be reversed.
Journal Entry for ITC Reversal:
Input CGST A/c Dr. XXX
Input SGST A/c Dr. XXX
To Output CGST A/c XXX
To Output SGST A/c XXX
GSTR-3B Compliance:
In your monthly GSTR-3B return, report this reversal under:
Table 4(B)(2) – “ITC Reversed – Others (Rule 42, 43 & Section 17(5))”
This ensures you’re GST-compliant and avoids interest or penalties during audits by the Delhi GST authorities.
? Practical Case Study by CHHABRIA ASSOCIATES – Based in Karawal Nagar, Delhi
Let’s say a trader in North East Delhi discovers that 50 units of a product have expired. The purchase price was 200 per unit + 18% GST.
▶ Stock Details:
- Cost = 50 × 200 = 10,000
- GST Paid (ITC claimed) = 1,800
Step 1: Write-Off Entry in Books
Dr. Loss on Expired Goods A/c 10,000
Cr. To Inventory A/c 10,000
Step 2: GST Input Reversal Entry
Dr. Reversal CGST A/c 900
Dr. Reversal SGST A/c 900
Cr. CGST A/c 900
Cr. SGST A/c 900
Step 3: Report in GSTR-3B
Report total 1,800 reversal under:
Table 4(B)(2) – ITC Reversed – Others
? Need help filing your return? CHHABRIA ASSOCIATES is just a call away.
Documents You Must Keep:
To stay compliant and audit-ready in Delhi:
- Internal Expiry/Damage Report
- Stock Register or Inventory Sheet
- Copy of Purchase Invoice (for which ITC was claimed)
- Insurance claim (if applicable)
- Photographic or Quality Control evidence (optional but helpful)
Final Words from CHHABRIA ASSOCIATES – GST Experts in Delhi
Accounting for damaged or expired stock is not just a bookkeeping task, it’s a regulatory requirement. Incorrect handling could lead to:
- Overstated profits
- Over-claimed ITC
- Penalties during GST audits
We at CHHABRIA ASSOCIATES, based in Karawal Nagar, North East Delhi, help businesses and traders stay 100% compliant with GST, Income Tax, and Accounting regulations.
? Contact Us Today:
CHHABRIA ASSOCIATES
? K-149, Main Road, Karawal Nagar, Delhi-110090
? Contact No.: +91 9971427648
? Email: chhabria.info@gmail.com
✅ Your Trusted GST & Income Tax Consultant in Karawal Nagar, Delhi.
