Input Tax Credit Availability

This query is : Resolved

Jayesh Doshi (Querist)
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14 July 2017 Dear all, A dealer is purchasing medicines & first aid kits for his employees & workers of the factory. whether he can claim ITC of GST paid on such purchases ?

CA Saloni

CA Saloni (Expert)
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14 July 2017 Yes ITC available... ITC is not available only for transactions mentioned in 17 (5) of cgst act

Jayesh Doshi

Jayesh Doshi (Querist)
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14 July 2017 Thanks for reply.

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Jayesh Doshi

Jayesh Doshi (Querist)
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14 July 2017 But as per my understanding ITC will be not allowed for the goods meant for personal consumption. so whether medicine falls under this criteria of personal consumption ? please clarify.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 Under the GST regime, the availability of Input Tax Credit (ITC) for goods and services used by a business is subject to specific rules and restrictions. Here’s a detailed look into whether ITC can be claimed on medicines and first aid kits purchased for employees and workers:

### **1. ITC on Medicines and First Aid Kits:**

**General Rule for ITC Eligibility:**
- **Business Use:** ITC is available on goods and services that are used for making taxable supplies or for furtherance of business.
- **Exclusions:** ITC is not available for certain goods and services specifically mentioned in the GST Act.

**Medicines and First Aid Kits:**
- **Medicines for Employees:** Medicines and first aid kits purchased for employees or workers of a factory fall into a gray area. The primary consideration is whether these are used for the furtherance of business or personal consumption.
- **Business Use:** If medicines and first aid kits are used for the well-being of employees in a factory setting, it may be argued that they are used in connection with the business, as maintaining employee health can be seen as part of the business operations.

### **Relevant Provisions:**

**1. **Section 17(5) of the CGST Act:**
- ITC is **not allowed** on goods and services used for personal consumption. However, the term "personal consumption" generally refers to goods or services used outside the business context.

**2. **Interpretation:**
- **Medicines:** If the medicines and first aid kits are directly used to maintain a safe working environment or to address health emergencies within the workplace, they might be considered as used for business purposes, and ITC could be claimed.
- **Personal Consumption:** If the medicines are used for the personal health of employees and are not related to business operations, then ITC may not be allowed.

### **Guidance:**

- **For Business Operations:** If the expenditure on medicines and first aid kits is part of maintaining workplace safety and health, it is justifiable to claim ITC. This is especially relevant in cases where health and safety are integral to business operations and compliance.
- **Documentation:** Proper documentation should be maintained, including invoices and records showing that the medicines and first aid kits are for business purposes.

### **Conclusion:**

- **ITC Claimable:** If the medicines and first aid kits are used to ensure the health and safety of employees in connection with the business, ITC can generally be claimed. However, it is essential to ensure that these expenditures are justifiable as part of the business operations.
- **Personal Use Exclusion:** If the items are used solely for personal consumption by employees, ITC would not be allowed.

### **Recommendation:**

It is advisable to consult with a tax professional or GST consultant to ensure compliance with GST regulations and to get specific guidance based on your business’s circumstances. They can provide a definitive answer based on detailed review and the most recent regulations.