LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Reimbursement for Laptop purchase

arup (paid assistant) (39 Points)

02 February 2022

Hello Team,

Could you please help me with the correct accounting and tax treatmnt for the below query.

We want to reimburse an employee for a laptop purchased by him which cost around 1.10 lakh.

note-If the employee left the company we will retain that laptop from him.

Thanks

Reply
Follow
Share

10 Replies

sabyasachi mukherjee (26039 Points)
Replied 02 February 2022

The laptop is a fixed asset.Now let's come to the core issue.As per hr policy the employee is a user of the laptop. He has paid for the laptop which will be reimbursed by the company considering the urgency.
In that case there is no tax treatment. If the vendor of the laptop has given a valid tax invoice, company can take input credit.

prasad Nilugal ( GST Practitioner & Accounts ) (14163 Points)
Replied 02 February 2022

Tax Invoice should be in the Trade Name of the Company , is it in the name of the employee ?.

arup (paid assistant) (39 Points)
Replied 02 February 2022

Yes it's in the name of employee..

prasad Nilugal ( GST Practitioner & Accounts ) (14163 Points)
Replied 02 February 2022

Tax Invoice should be in the Trade Name of the Company . you can not show in the books of accounts unless tax invoice is in the name of the company also it is important for Audit purpose .

sabyasachi mukherjee (26039 Points)
Replied 02 February 2022

If it's in the name of the employee , then company cannot take input tax credit. Then the company must take an undertaking from the employee that in the event of the employee leaving the service the laptop will be the property of the company.

JJJ (Need help) (673 Points)
Replied 02 February 2022

Too many needless complications in the above answers!

The solution is rather simple: the company buys the laptop from the employee. You might lose out on the ITC (but that concern was not mentioned in the query) - but you can capitalise the entire value because that will be your cost of purchase.

Run this by your auditor once - so long as there is an actual asset that was acquired and an actual payment made, it should not be a problem.

prasad Nilugal ( GST Practitioner & Accounts ) (14163 Points)
Replied 02 February 2022

As per JJJ reply ,
Can employee issue Invoice to Company for purchase of laptop ?. if not then what is documentary evidence for entry in books of accounts and Audit .

JJJ (Need help) (673 Points)
Replied 03 February 2022

Of course an employee can make an invoice. Anyone can make an invoice and an entity is free to buy from or sell to whoever they choose.

The only concern for the authorities - if at all - will be the legitimacy of the transaction. And that is addressed by the existence of an invoice, a payment made that matches the amount and party mentioned on the invoice and of course the actual physical asset which is the laptop.

sabyasachi mukherjee (26039 Points)
Replied 03 February 2022

Wrong JJj.
You cannot capitalize on the basis of the same.It must be a valid gst tax invoice.

Nurul Ahmed (6 Points)
Replied 04 June 2023

Great article! Your insights are valuable. If you want to learn more, <a target='_blank' rel='nofollow' href="https://sites.google.com/view/luxury-deal4you/home" target="_blank">click here</a>.