In light of the issues raised by the GST officer, what advice should CA. Gaurav give to the company, with reference to the relevant provisions of…

CA Gaurav should give following advice to the company: Tax liability An activity or transaction is considered as supply only when it is supply of goods or services or both for consideration in course or furtherance of business. However, Schedule I of the CGST Act, 2017 specifies exceptions where an activity or transaction is deemed to be a supply even without consideration. One such exception is gifts exceeding - 50,000 in value in a financial year by an employer to an employee. Since in the given case, amount of gift does not exceed - 50,000 per employee, gifting of home appliances to employees and workers 1 does not amount to supply. ITC admissibility Following ITC availed is inadmissible:(i) ITC of 150Lakh is not admissible in the month of March 2024, since goods have not been received in said month. (ii) ITC of 2.70 lakh is not admissible in November 2023 since ITC on outdoor catering is blocked if the same is not used for making an outward supply of outdoor catering or as an element of a taxable composite/mixed supply. (iii) ITC on gifts to employees is inadmissible since ITC on goods disposed of by way of gift is blocked under section 17(5).Therefore, above credit will be reversed. Interest and penalty Interest under section 50 is payable on amount of utilized ITC from the date of utilisation of such wrongly availed ITC (i.e.18th April, 2024, earlier of GSTR-3B due date or filing date) till the date of reversal of that credit or payment of tax in respect of such amount @ 15% per annum. The wrongly availed ITC is deemed to be utilised to the extent the Electronic Credit Ledger balance falls below such ITC. Thus, interest is payable on ITC utilised, i.e.42.60 lakh [(150 Lakh +2.70 lakh+ 9.90 lakh) - 120 lakh] Penalty as per the provisions of section 74A, will be applicable. 1 It has been assumed that workers are also on company's payroll.