prpri ITC on sanitizers & masks distributed to employees amid COVID-19 ITC on sanitizers & masks distributed to employees amid COVID-19

Corona-Virus: ITC won’t be available on the masks and sanitizers distributed to employees?

Hello folks, I hope you are in good spirits and are helping the nation in fighting the invisible demon of COVID-19 by staying at home.

This COVID-19 has compelled us to live in a phase that was neither wished, nor imagined by anyone, and unprecedented steps be, it nation-wide lockdown, shutting business operations, sealing of the national and international borders  or working from home, are being taken by the authorities to keep its affect to a minimum.

But we all have faith that we could fight this together, all thanks to those fighting on the front-line be It the doctors and the medical staff, police and armed forces, vendors of essential items, farmers and all those working day & night to save the humanity.

And considering the impact that covid-19 could have on the humanity; workforces are being allowed to work from home and are also being encouraged to maintain personal hygiene.

This also involves the distribution of sanitizers, masks and other stuff to the employees and the same being installed at the work places.

ITC on masks and sanitizers distributed to employees

Now the question arises, whether the ITC of taxes paid on these inward supplies available? YES OR NO?

Well, we all know that the ITC is allowed in respect of the inward supplies that are being used or intended to be used in the course or furtherance of business by virtue of section 16(1) as long as the other condition of section 16 are being met.

Considering the condition of section 16 being met, the ITC could still be denied/ blocked under section 17(5), inter-alia on account:

-personal consumption


But can the distribution of sanitizers and asks by the employer to the employees be regarded as ‘gift’ or personal consumption??

Last year, the Authority for advance ruling, Tamil Nadu in the matter of M/s. Chennai port trust, ruled that:

Before determining whether the applicant is eligible for Input Tax credit for the inward supply of medicines, the relevant statutory provisions are referred to as under:

Section 16(1) to (4) of CGST Act 2017 & TNGST Act 2017 provides the “Eligibility and conditions for taking Input tax credit” of is as follows:

(5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:-

Section 17 (5) of the Act, which blocks/ restricts certain credits, states as under:16 (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.


(g) Goods or services or both used for personal consumption;

8.2 In the instant case, the applicant has their own in-house hospital for use by the employees, retirees and their dependents. This is a free center where all the services and medicines are provided free to the employees. No consideration is charged from the employees for this. This provision of free medical care is mandatory as per the Regulations made under Major Ports Act. These are mandated to be provided to the applicant’s employees, their dependents, pensioners and family pensioners for their own in-patient and out-patient treatments. These treatments include medicines which are also provided free of charge to the employees for their personal use. The medicines and medical facilities are proved by the applicant to its employees for their personal use. Therefore, as per Section 17 (5) (g) of CGST/TNGST ACT, input tax credit is not available for the medicine that the applicant is procuring for the consumption of its employees and pensioners and their dependents. The applicant has stated in their application that these are not “goods for personal consumption” as the applicant pays for the same. The argument does not hold. The fact of who pays for the medicines here is irrelevant to the usage of the said medicines. They are used by the employees and dependents and hence are for personal consumption and the applicant is ineligible to take input tax credit on the inward supply of medicines used to provide health facilities to its employees in its hospital.

9. In view of the foregoing, we rule as under:

The applicant is not entitled to take credit of input tax charged on the inward supply of medicines which are used to provide medical facilities to the employees, pensioners and dependents in the in-house hospital.” 

But can this be regarded as ‘personal consumption’????

All the assets of the incorporeal beings are used and consumed by the employees or the other natural person and the ITC is not denied on every business asset.

Thus, the nature of the ‘use’ or ‘consumption’ needs to be examined.

If a company provided a laptop to its employee, then it is used by a ‘person’ but could not be regarded as ‘personal consumption’, as the same is required to be provided so as to enable the employee to perform his official duties and tasks.

These are the ‘tools for trade’ that must be provided in order to avail the services and skills of the workforce.

Thus, the differentiation needs to be made, whether the same is for:

-Performing a tasks; or

-is reward for performing a task.

Therefore, the provisions of section 17(5)(g) could be invoked where there is no ‘nexus’ between the item in respect of which the ITC is availed and the outward supplies.

Thus, this is to be seen whether the ultimate use or the consumption of the item is personal benefit of the person or not. Even, if it is a personal benefit to the person, but the ultimate benefit is for the company the credit should not be restricted.

In the present circumstances, it is of the utmost priority that the personal health of all the employees is maintained and is not compromised, so that the work force can discharge their duties even from home or they can join the workforce immediately when the pandemic disappears/ perishes.

Thus, in the light of the aforesaid, it could be said that the ITC on the sanitizers, masks and other hygiene stuff provided by the employer to the employee could be availed.

The author is a qualified chartered accountant and can be reached at: Email:

Disclaimer: This article is merely a general guide meant for learning purposes only and do not constitute a legal advice. While every effort has been made to avoid any kind of errors or omissions, it is likely that errors may have crept in. Any mistake, error or discrepancy noted by the readers should be brought to the notice, so that suitable edits/ corrections shall be affected in the upcoming write-ups. It is notified that the author will not be responsible for any damage or loss to anyone of any kind or in any manner whatsoever by referring to this article.

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Qualification: CA in Practice
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Location: Delhi, New Delhi, IN
Member Since: 19 May 2019 | Total Posts: 8
Vishal Jain ( (H), ACA), is a qualified Chartered Accountant having meritorious academic background. Having experience in carrying out opinions, assurance and advisory services, including review of business operations in different sectors (Real estate, manufacturing, hospitality, trading, expor View Full Profile

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July 2021