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Case Law Details

Advance Ruling for ITC on inward supplies of goods and services given as gifts

Legal Name of Applicant

Surfa Coats (India) Pvt. Ltd

Details of Application

GST-ARA, Application No. KAR ADRG 28/2019 dt. 26.03.2018


AAR Karnataka (155) Advance Rulings (1059)

Members of Bench

  1. Shri Harish Dharnia, Addl. Commissioner of Central Tax
  2. Shri Ravi Prasad M.P., Joint Commissioner of State Tax

Date of Judgement /Order


Advance Ruling required for

Whether the applicant eligible to claim the GST Input tax credit on items purchased for the furtherance of business?

Brief about Applicant:

M/s Surfa Coats (India) Pvt. Ltd., having the business of manufacturing decorative paints meant for interiors as well as exterior surfaces and have 3 manufacturing plants at Peenya, Bengaluru to cater the market needs from time to time.

Brief about the Transaction:

Applicant frames incentive schemes, depending on the market conditions, to motivate dealers to lift their products. The titles of the schemes read as Painters Schemes, Dealers Incentive Schemes, Gold Schemes, Foreign and Local Trip Schemes etc. The incentives are given subject to fulfillment of terms laid down in each such scheme. Incentive, once computed in terms of above schemes, is given mostly in kind i.e. TVs, Refrigerators, Washing machines, Mixers, Wet Grinders, Watches, Mobiles, Gold Coins etc., for distribution to Painters and dealers.

Applicant also have a Gold Scheme in which gold is given to dealers once the scheme is over as per actual sale in terms of targets fixed. The quantum of gold is specified in the incentive scheme in line with actual sales done by the dealers.


As per Bench, It is clearly evident  that Section-17(5)(h) of CGST Act 2017 does not allow credit on any goods disposed by way of gift or free samples, whether or not in the course or furtherance of business. It is an admitted fact that the applicant herein purchases the items to be disposed as gifts under various incentive schemes to dealers/painters etc. Therefore the applicant is not entitled to avail ITC on such items.

Applicant also offers foreign and local trip schemes as incentives, for which they procure various tax suffered services. The free travel services so provided are without any consideration and hence do not qualify to be a “supply” in terms of Section 7(a)(1) of CGST Act 2017 and Schedule-I to CGST/KGST Act 2017.

As per Circular No.92/11/2019-GST dated 07.03.2019, issued by CBIC, wherein, at Para (A)(ii), it is certified that “Input tax credit shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration” In the instant case the applicant offers free foreign/local trips, as incentives, to the dealers/painters etc., without any consideration. Therefore the input tax credit on the services procured (input services), for offering services of free trips, is not available to applicant.


(Under Section-98 of CGST Act 2017, and The Karnataka Goods & Services Tax Act ,2017)


"The applicant is not eligible to avail input tax credit on the inward supplies of goods and services which are attributable to the incentives provided in the form of gifts of goods and services to the painters and dealers and other persons under the CGST/SGST/IGST Act."

Disclaimer: The contents of this article are solely for informational purpose. It does not constitute professional advice or a formal recommendation. No part of this article should be distributed or copied without express written permission of the author.


Published by

Kusum Gandhi
Category GST   Report

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