Partial recovery of Mobile phone from employee-GST Input

[ROHIT GOEL]

Dear sirs,

As per policy of one of our clients, they provide mobile phone to employees as per their pay scale. For example, Scale A employees are allowed phones upto ₹ 10,000/-. If employee intends to purchase more expensive mobile, say for ₹ 15000, then balance of 5,000/- is recovered from him.

Now in effect, mobile is capitalised by 10,000/- in books but GST ITC is taken on entire invoice value of 15000. Whether this is correct or instead recovery of 5000/- should be treated as sale and corresponding ITC reversed?

[Rajagopalan Ranganathan]

Sir,

Since you are recovering ₹ 5000/- from your employee for all practical purpose the consideration in excess of 10000/- is paid by the employee. Therefore ITC of gst paid on ₹ 5000 belongs to the employee. Therefore you have to reverse the ITC of gst paid on 5000/-.

The moot question is whether you recover ₹ 5000/- along with gst paid on such amount or not.

[Ganeshan Kalyani]

Sir, if the asset is capitalised with GST then ITC cannot be taken.

AI Summary

GST input tax credit may require reversal when employer recovers excess payment from employee for supplied mobile phones.
Whether an employer may claim input tax credit on the full invoice value of a mobile supplied to an employee when the employer pays GST on the entire invoice but recovers part of the purchase price from the employee; the correct approach is to reverse the ITC attributable to the recovered portion because that portion is effectively paid by the employee, and to determine whether the recovery includes GST, noting that capitalising the asset inclusive of GST precludes claiming ITC on the capitalised amount.