Inventory Lost in an Amazon Warehouse: How to Claim Reimbursement

When an Amazon fulfilment centre loses or damages your stock, Amazon's FBA reimbursement policy may pay you for it. Start with your inventory reports in Seller Central, check whether a reimbursement was already issued, and file a claim for the rest within the window shown in your account. Then reverse the GST credit on the lost goods.

Where can inventory go missing?

There are three places, and each is checked in a different report.

How do you claim, step by step?

1. Pull the records for the period. In Seller Central, open the inventory and FBA reports and download the inventory ledger or reconciliation report, plus the reimbursements report. The menu names change from time to time, so search the Help section if you cannot find them.
2. Match units, not rupees. For each product, take units sent in, add returns received, take away units sold and removed. Compare the result with what Amazon shows as available. The difference is your first list of possible losses.
3. Remove what was already paid. Tick off every unit already covered by a reimbursement, whether as cash or a replacement unit. Many "lost" units are later found and put back. Those are not a claim either.
4. Check the window for each item. The current claim periods are on the FBA inventory reimbursement policy page inside Seller Central. Items outside the window are not eligible, however good your proof.
5. Open a case. Use the reimbursement or "investigate" option against the shipment or item where it is offered. Otherwise raise a case with seller support. Give the shipment ID or order ID, the product identifier, the units, and attach your invoice.
6. Follow up with facts. If the case is closed without payment, reply once with the specific report line that shows the loss. Short, factual replies get further than long ones.
7. Book the result. Record the reimbursement in your accounts, and reverse the GST credit on units that are finally lost.

What happens on the GST side?

This is where most guides stop, and where a CA's view matters.

Input tax credit has to go. Section 17(5)(h) blocks input tax credit on goods that are lost, stolen, destroyed or written off. If you claimed credit when you bought the stock, reverse it for the units that are lost for good. If the stock sat in another state under a separate GSTIN, as with many FBA warehouses, the reversal belongs to that GSTIN. Our guide to ITC reversal explains how it is shown in GSTR-3B.

No sale invoice, no GSTR-1 entry. You did not sell the goods. The reimbursement is not a sale to Amazon, so it does not go in the B2B or B2C tables of GSTR-1. Your marketplace tax report should not list it as a sale either.

Is GST payable on the reimbursement? The common view relies on CBIC Circular 178/10/2022-GST, which deals with compensation for loss as opposed to payment for a supply. Most practitioners treat a reimbursement for lost stock as compensation, not a supply. It is a judgement call on facts, so confirm it with your CA, especially if the amounts are large.

Income tax. The cost of lost goods comes out of your stock and the reimbursement is business income. In most cases the two roughly cancel out. Book both, so your stock in the books matches the stock at Amazon.

Moving stock to an FBA warehouse in another state? Read GST on stock transfer to an Amazon warehouse first, because the GSTIN that holds the stock is the one that reverses the credit.

A worked example

Neha sells hair dryers through FBA. Her cost is Rs 1,000 a unit plus GST. Say the product is taxed at 18%, so she claimed Rs 180 of input tax credit on each unit. Her October reconciliation shows 30 units missing.

Her GST work: 22 units are finally lost, the 12 already paid for, the 7 claimed and the 3 outside the window. She reverses Rs 180 on each, which is Rs 3,960 of credit. The 8 units that were found keep their credit.

The lesson is the 3 late units. Had she reconciled each month, those Rs 3,000 would have been a claim, not a write-off.

The mistake sellers usually make

Reconciling once a year. By then many losses are outside the claim window, and the proof is harder to find. A monthly check of the reimbursement and inventory reports takes under an hour for most small sellers.

The second mistake is forgetting the GST credit. Sellers chase the cash from Amazon and leave the input tax credit on lost units in their books. That shows up in an audit or a notice, with interest.

Should you use a paid reimbursement service? For a few hundred units a month, a monthly routine is enough. Above that, a service may pay for itself, but read its fee terms and what access it wants to your account. Inventory losses are among the issues FBA sellers raise most in our Seller Intelligence report.

Frequently asked questions

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