Can ITC avail on uniform to employees by the company

[RameshBabu Kari]

Dear Experts,

Company providing the uniform to their employees and for that company made contract with tailor and tailor is already registered under gst and he billed the company with gst. In such case, can company avail the ITC ?

In this case, any differences will be there if uniform expenses are all borne by the company & does company eligible for the ITC ? or if such expenses recovered from the employee ?

[KASTURI SETHI]

In the present GST era, we are to examine the admissibility of ITC in view of the wordings, " in the course or furtherance of business". Can a business man run his business without uniform or not ? That is crucial. In my view, GST paid on tailoring uniform does not fit into this criteria. Regarding second scenario, there is a world of difference between the the two situations. If amount recovered from employees, no chance of ITC at all, if we presume admissibility. Amount must be borne the company.

[RameshBabu Kari]

Dear Experts,

if uniform expenses are all borne by the company & does company eligible for the ITC on payment made to such tailor ?

[rajkumar shukla]

In my view since as per schedule i gifts not exceeding fifty thousands in value in a financial year by an employer to an employee shall not be treated as supply of goods or service or both, noITC can be availed.

[KASTURI SETHI]

Anyhow end result is same.

[KASTURI SETHI]

Company may not recover from the employees even then it is a hard nut to crack. I mean to prove in due course or furtherance of business. Is not possible.

[subramanian vijayakumar]

No they​can't avail ITC as it is not in the course of furtherance of business

[KIRTIKUMAR PUROHIT]

In my view; When to create identity of Business Organisation in the market if organisation provide uniform to his employee, in is a part of furtherance of business thus ITC may available but proper officer may be denied such ITC and issue the SCN but we can file appeal against such denied.

[KASTURI SETHI]

Nobody likes litigation. Risk of nterest and penalty is there.

[Nash Industries I Pvt Ltd]

Advisable not to avail the ITC, entering into unwanted litigation.

Regards

S.Ramaswamy

[Himansu Sekhar]

The credit can be availed by the company. But the goods should be there property of the business entity. These should not be meant for personal consumption of the employee.

Is Itc available on uniform expense of contractual employee?

ITC may not be available on expenses made for uniform provided to employee as the said facility can be treated as Employee welfare like quarters, Gym and entertainment facility etc provided to employee.

[subramanian vijayakumar]

No itc is available these expenses are notified foe claiming ITC

[Monarch Bhatt]

The issue is with respect to the availment of ITC on the cloth and stitching charges paid for the uniform. My views are as follows:

Situation 1: Expenses are recovered from the employee.

Reply: ITC not eligible.

Situation 2: Contracted employee or employee of the company expenses borne by the company.

Reply: The credit is admissible provided it has been used "in the course or furtherance of business". The phrase in the present case can be analysed considering any or all of the following criteria:

A. Whether it has any nexus with the output supply? Example: Jewelry showroom, Jewelry manufacturing unit, hotels, etc. In such cases, uniform is required to represent the company. Uniform of the employee build up the reputation in the minds of their guest. Hence, in such cases, ITC is eligible.

B. Whether employee is allowed to use such uniform for personal purposes? Generally company does not allow their employees to use it for personal purposes. Hence, ITC is eligible.

C. Who is the legal owner of the uniform when employee leaving the organisation? Generally company takes the uniform back from the employee at the time employee leaving the organisation, depending upon the life of the uniform.

Such criteria needs to be analysed while determining the eligibility of credit on the uniforms as it purely depends upon the nature of your output supply.

AI Summary

Input tax credit on employee uniforms depends on commercial nexus with output and business ownership of the uniform.
Claiming input tax credit on employee uniforms depends on whether the uniforms are supplied "in the course or furtherance of business." Credit is not allowable if costs are recovered from employees. If the employer bears the cost, ITC may be claimed only where a commercial nexus with the taxpayer's output exists, the uniform is not for personal use, and the uniform is treated as business property; tax authorities may still deny credit, exposing the taxpayer to interest, penalty and litigation.