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UPDATE 17(5)(h) of the CGST Act GOODS LOST, STOLEN, DESTROYED, WRITTEN OFF OR DISPOSED OF BY WAY OF GIFT OR FREE SAMPLES; After issuance of circular no 92/11/2019-GST, a large number of judgements and also contradictory by AAAR and AAR requires further clarification by the CBIC. S. No
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FAQ :
Section 17(5)(h) of the CGST Act covers restrictions on Input Tax Credit (ITC) for goods that are lost, stolen, destroyed, written off, or disposed of by way of gift or free samples.
Generally, ITC is not available for free samples and gifts, as confirmed by Circular No. 92/11/2019-GST and several judicial pronouncements.
For 'Buy 1 Get 1 Free' offers, ITC is available, and the transaction may be considered a composite or mixed supply, as covered by Circular No. 92/11/2019-GST.
Discounts, including 'Buy More Save More' and secondary discounts, generally allow for ITC. These are often reflected on invoices or through credit notes, and are covered by Circular No. 92/11/2019-GST.
ITC is not admissible for finished goods lost in a fire accident or for steel scrap sold in the open market, requiring reversal of ITC on inputs used.
The denial of ITC on inputs consumed in expired cakes and pastries is not admissible, and reversal is required. However, the blocking of credit provisions is considered inapplicable for inherent loss during manufacturing.
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