CA Akhil Rastogi
DIWALI GIFTS: IS ITC AVAILABLE?
Diwali is the time to gift to your friends, family, employees, customers and clients.
Let us have a look whether ITC is available for purchase of Diwali gifts for vendors, customers or consultants.
Section 16: Taxpayer is entitled to take ITC on tax charged on supply of goods or services which are used in the course of furtherance of business. In the course of furtherance of business: an act of advancement or promotion of business for its sustained growth and profitability.
Diwali gifts are given to the person related to business for good business relations for the advancement of business.
It should be noted that Diwali gift shall be treated as supply of goods for the vendor who has sold such gifts and tax should be charged by the supplier. Therefore, Diwali gifts fulfill the condition of Section 16 and ITC can be claimed.
Issue 1: ITC available on sweets and beverages purchased for distribution to employees on Diwali?
Solution: ITC on food and beverages comes under blocked credit as per section 17(5). Hence ITC is not available on foods and beverages purchased for employees and workers.
Issue 2: Gifts to employee
Solution: Salary payable to employees shall not attract GST as it is not treated as Supply.
Gifts given by employer exceeding the value of Rs. 50,000 shall be liable to GST. High-value gifts given such as car, home, gold etc exceeding Rs. 50,000 is liable to GST.
ITC is NOT available such products gifted to employees.
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