Eligibility of taking GST Credit on purchase of safety shoe

[Ragavan Vijayakumar]

We request expert opinion on taking GST credit on purchase of safety shoe to company workers. The company purchased safety shoe in the company name and GST is also charged in the invoice. The company recovered part of the cost of the shore from the salary of the workers and the remaining cost of the shoe was borne by the company. in this case ,

1.whether the company eligible to take entire GST credit as per invoice?

2. Whether the company is eligible to take GST credit for the cost borne by the company

3, Whether the company is not eligible for the whole invoice amount ?

Regards,

V.Ragavan

[Shilpi Jain]

Firstly, recovery of the amount from the employee could trigger supply whereby the company would have to pay GST on the entire amount of the shoe (being a related party transaction) and not only on the amount recovered. In such a scenario the company would be eligible to take entire ITC.

Assuming a scenario where no amount is recovered from the employee, the company will be able to take entire credit as the said goods are used for business purpose and if used in respect of taxable supplies. There would be no outward liability of GST for making the shoe available to the employee as it is given for perfomance of the duties of the employee.

[Rajagopalan Ranganathan]

Sir,

If the supply of safety shoes is obligatory for an employer to provide the same to its employees under any law for the time being in force then you are eligible to take ITC on the portion of the cost of the shoes which is borne by you. This is my opinion.

[YAGAY and SUN]

In our view, you are eligible to avail ITC on the GST paid on Safety Shoes since safety of employees is an integral part of manufacturing in certain manufacturing industries such as Chemical and Steel Manufacturing Industries. However, this will be limited to the extent of amount /cost paid by you less amount/cost recovered from your employees.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Sri Renganathan.

[Ganeshan Kalyani]

In my view , in a factory wearing of safety shoe is mandatory. As per Safety Rules every worker should have safety equipment like gloves, helmet/cap, safety shoes, glass, uniform which is of good quality than regular wear cloth. There is safety audit also conducted to check these factors in a factory. The company would prefer to expand on safety items rather than putting the life of the worker in risk. Hence, I am of the view that the credit is rightly eligible.

[Himansu Sekhar]

In GST there is less restriction on ITC availment. If it is not for personal use, and obligatory for the exclusive use in the process, itc cannot be denied

AI Summary

Input tax credit on safety shoes: ITC allowed if used for business and adjusted for employee recoveries.
Availability of input tax credit on safety shoes depends on business use and treatment of employee recoveries: ITC is generally available if shoes are used for taxable supplies or for performance of duties; recoveries from employees may constitute a supply attracting GST and require adjustment, and where provision is obligatory or integral to the manufacturing process ITC is recognised to the extent of the employer's cost after recoveries.