Parth Ltd. engages itself in electronic products with zero inventory policy at the year. In FY 2020-21, it had reported a gross profit of 25% but in FY 2021-22, it reported a gross loss of 15% which resulted in a balance in the electronic credit ledger in FY 2021-22. The department issues the notice for a reversal of credit for FY 2021-22. Whether this contention is tenable in law?
GST is levied on the transaction value which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
GST law does not contain any provision for reversal of ITC in case of supply at the reduced price. Therefore, the contention of the department of reversal of ITC is not tenable in law.