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With the recent second wave of Covid-19 pandemic sweeping the country, the importance of healthcare, especially oxygen equipment, cannot be overemphasized. In this context, it has become commonplace for companies to purchase oxygen concentrators and provide them to employees in a returnable manner according to their needs.
Although this is a welcome measure for employees, a related issue for the company is whether the company can obtain a credit for GST paid to employees on oxygen concentrators that can be returned after use.
Usually, such oxygen generators are stored at the company’s premises and are only provided to employees when needed. Once employees use the oxygen concentrator, the company will take it back and use it for other employees as needed.
The entry point for obtaining credit under the Goods and Services Tax Law is the use of goods or services in the course of business or promotion of the business. After that, all supplies must pass the touchstone test that does not belong to any restricted category.
The definition of “business” under the Goods and Services Tax Law has a broad meaning and includes any activity within its scope, whether it is a pecuniary benefit or not. As far as the relationship with the business is concerned, a position can be taken. Since the oxygen concentrator is used to help employees increase oxygen levels during the COVID-19 pandemic, it can be said that it will also be used to advance or advance the company by maintaining the health of employees. business.
The categories of restrictions that cause difficulties in the minds of taxpayers are restrictions on goods or services or both for personal consumption.
The question is whether the oxygen concentrators provided to employees are used for personal consumption. Therefore, under the above restrictions, credit is prohibited.
At first glance, it seems that the oxygen concentrators are indeed used by employees and their families. Therefore, they should also be prohibited under the restricted category of “self-use items”.
In order to analyze the location, it is important to understand the meaning of the term “personal consumption”.
The Goods and Services Tax Law does not define the term “personal consumption”. Inferring from the EU VAT law, as far as motor vehicles are concerned, if a person intends to use the motor vehicle exclusively for the purpose of operating their business, that person cannot obtain credit. In addition, the clause also stipulates that if the taxable person intends to provide the car to anyone (except for lease), it should not be considered that the taxable person intends to use the car only for the business it operates. Individuals (including taxpayers who are partnerships, partners) for private use, whether for consideration or not.
In the decision, the following factors were considered when deciding whether the motor vehicle is intended to be used exclusively for commercial purposes:
It should be noted that the EU VAT law in the context of non-commercial use is different from the reference to “personal consumption” in Article 17(5)(g), because in EU VAT, private use is based on intent and availability. .
Although the term used in the EU VAT law is not “personal consumption” but “non-commercial use”, even though the above applies to oxygen generators provided in a returnable manner, it is worth noting that the use of oxygen generators is not the only To any specific employee. In addition, this oxygen generator is provided to employees on demand. Once employees use the oxygen concentrator, the company will take it back and use it for other employees as needed. Therefore, the use of employees is only on a need basis and not on an exclusive basis.
In addition, it is worth considering that employees and their families did not consume oxygen concentrators. On the other hand, the oxygen generator is only “used” rather than “consumed” by employees and their families, and returned after use.
In more detail, in the process of using the oxygen concentrator, it will not be consumed as a commodity by employees, but will be taken back by the company for further use by other employees. Therefore, the use of oxygen concentrators is supervised by the company, and employees will not consume them. In addition, oxygen generators will only be provided to employees when needed, and will not be handled by the company. For this reason, a position can be adopted, that is, oxygen concentrators provided to employees on demand are not restricted by personal consumption.
Taking a rough look at the restrictions on personal consumption, it may appear that because the oxygen generator is only used by employees and their families, it is also subject to “personal consumption” restrictions. In the absence of judicial precedent and a clear understanding of the term “personal consumption”, the use of credit is not without controversy. Since there are two possible explanations, the debate on this issue has matured.
Considering the current situation caused by the Covid-19 pandemic and providing employees with oxygen concentrators on a recyclable basis is a common and frequent practice, appropriate clarifications should be issued covering the outstanding issues mentioned above to end trade and industry.
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Post time: Jul-05-2021