The correct answer is C.
Input tax credit (ITC) is a tax credit that is available to businesses on the purchase of goods and services that are used in the course of their business. ITC can be claimed on the purchase of goods and services that are used to manufacture, produce, or supply goods or services, or on the purchase of goods and services that are used for administrative or other purposes.
The goods and services that are eligible for ITC are specified in the Central Goods and Services Tax (CGST) Act, 2017. The CGST Act provides that input tax credit is available on the purchase of goods or services by an assessee for employees, if the services are notified which are obligatory for an employer to provide to its employees under any law for the time being in force.
The following are some of the services that are notified as obligatory for an employer to provide to its employees:
- Provident fund
- Employees’ state insurance
- Gratuity
- Medical benefits
- Leave travel concession
- House rent allowance
If an employer purchases goods or services for its employees, and the services are notified as obligatory for an employer to provide to its employees under any law for the time being in force, then the employer can claim ITC on the purchase of such goods or services.
The following are some of the services that are not notified as obligatory for an employer to provide to its employees:
- Food and beverages
- Transport allowance
- Gift vouchers
- Entertainment allowance
If an employer purchases goods or services for its employees, and the services are not notified as obligatory for an employer to provide to its employees under any law for the time being in force, then the employer cannot claim ITC on the purchase of such goods or services.