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

Debate on GST Input Tax Credit: Should ITC be reversed on employee-recovered phone cost exceeding company policy? A client provides mobile phones to employees based on their pay scale, with a policy allowing Scale A employees to receive phones up to 10,000. If an employee opts for a more expensive phone, the excess cost is recovered from them. The client capitalizes the phone at 10,000 but claims GST Input Tax Credit (ITC) on the full invoice amount of 15,000. One expert advises reversing the ITC on the 5,000 recovered from the employee, as this amount effectively belongs to the employee. Another expert notes that if the asset is capitalized with GST, ITC cannot be claimed.