GST ITC on Masks, Sanitizers and other Items with CA Rajender Arora
Channel: Tax4wealth
Date: 19/06/2020

GST ITC on Masks, Sanitizers and other Items with CA Rajender Arora

Brief Discussion on ITC availment on Sanitizers, Masks and other Covid Protection Items.

For Any Input tax credit following two conditions are primarily to be fulfilled.

1. It should be used or intended to be used in the course or furtherance of business.

2. It should comply conditions laid down under Sec 16 of CGST Act. And ITC claimed should be not blocked under sec 17(5).

Let us analyse both the conditions in context of masks, sanitizers and other Covid Protection Items.

The term "in the course or furtherance of business" is not defined under the Act.

But there is sufficient jurisprudence expressed on this under the earstwhile regime of excise and service tax. Where it had been explicitly established that the phrase  in the business does not only include manufacturing but also all other functions associated directly or indirectly with manufacturing. Even maintenance of garden in the factory is squarely covered under this phrase. This has only criteria that if any activity is done for the advancement, execution or promotion of the business then it shall fall under the phrase "in the course or furtherance of business".

So, first test is passed for inward supply of masks, sanitizers and other items. As all of these are to provide a safe working environment to employees.

So as to conduct business for its execution and advancement.

Next Condition has two sub parts. One is adherence to conditions mentioned in sec 16(2). Under this, recipient should have received goods and having valid invoice and filed his return and supplier must have paid the tax collected.
If all there conditions are fulfilled, credit shall be available unless blocked under sec 17( 5)(g) or (h).

Now next limb of the second condition is to check whether ITC on these masks, sanitizers and covid protection items are whether for personal consumption {Sec17 (5)(g)} or distributed as free gifts or samples{Sec17 (5)(h)}?

In my considered view, any thing given to employees during the course of their employment shall not be treated to be used for personal consumption but for the discharge of their employment duties only. So{Sec17 (5)(g)} does not come into play.

Now, whether these items are given for free samples or gifts to employees? Again, in my considered view, these are not distributed as free samples or gifts also. Therefore, {Sec17 (5)(h)} will not have any impact on the eligibility of ITC on these goods.

So, to my humble understanding, Input tax credit for masks, sanitizers and other Covid Protection Items shall be available.

However, I request government to issue a circular to this effect and clear the mist about availability of ITC about this and many more other credits for inward supplies which are exclusively procured to provide protection to employees from this pandemic. 

This is the time to clarify this so as to motivate Employers to spend without hesitation on the much needed protection.

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