itc on purchases

[Madhavan iyengar]

A Company has purchased some t shirts which will be given to employees free of cost the t shirts will bear the name of the company t shirts will be worn by employees at various business events of the company

a) is ITC available on the purchase of t shirts

b) will GST be leviable on the t shirts given free of cost and if gst is levied can then ITC be claimed

[KASTURI SETHI]

Query-wise reply is as under:-

(a) Yes, it being in the course of employment.

(b) No. Excluded vide entry no.1 Schedule-III.

[KASTURI SETHI]

In continuation of my reply, i further clarify that tax has been paid on T-shirts by the Company at the time purchase. These T-shirts bearing the logo/brand of the Company (who purchased) are worn by the employees while performing their official duties. Thus we can say that these shirts are not for personal use and hence cannot be termed as gift. Availment of ITC is not hit by Section 17(5) (h) of CGST Act inasmuch as these shirts are used in the course of business (employment).

No supply is involved as the Company has used shirts for its own purpose in the course of business.

AI Summary

Input Tax Credit on company-branded employee uniforms; GST not leviable where shirts are used in course of business. Input tax credit is available on purchase of company-branded T shirts used by employees in the course of employment and for business purposes; such shirts, paid for and used by the company while employees perform official duties, are not personal gifts and are not impeded by blocked credit rules. No outward supply arises when the company uses the shirts for its own business purposes, so GST is not leviable as a supply and the ITC claim remains intact.