Changing Face of Professional Training and the Emerging GST Question
In the contemporary professional landscape, learning has significantly transcended traditional classroom settings. Residential seminars, leadership conclaves, and specialised training programmes have become fundamental components of ongoing professional development. To enhance the overall experience and cultivate a sense of belonging and professionalism, organisers routinely provide participants with conference kits, study materials, and occasionally trolley bags or backpacks embellished with institutional branding. Although these practices are generally regarded as appropriate from academic and organisational perspectives, they often raise a pertinent and pragmatic Goods and Services Tax (GST) question: whether Input Tax Credit (ITC) can be availed in respect of such items or is disallowed for personal consumption or gifts.
This question is not merely academic. In an era of frequent departmental audits and increasingly strict interpretations of blocked credit provisions, even routine business practices such as the distribution of seminar kits are often subjected to scrutiny. It therefore becomes essential to examine such transactions through the lens of statutory provisions, commercial reality, and judicial principles governing input tax credit.
The Practical Seminar Scenario
Let us examine a practical example involving a Professional Training Institute (PTI). The PTI conducts a three-day non-residential seminar for professionals, charging ₹20,000 per participant. This fee includes attendance at all technical sessions, course materials, a conference kit, and a trolley bag, all included in the seminar package. The trolley bag is obligatory and provided to every registered participant without exception. There is no option to opt out of receiving the kit or to pay a reduced fee in its absence.
The PTI pays GST on the procurement of these trolley bags from its supplier and seeks to claim Input Tax Credit (ITC) on the same. The core issue, therefore, is whether such ITC is legally admissible or stands blocked under the provisions relating to personal consumption or gifts.
Whether There Is a "Supply" under Section 7 of the CGST Act
Before examining ITC eligibility, it is essential to first confirm whether the outward activity itself qualifies as a "supply".
Statutory Extract - Section 7(1), CGST Act, 2017
"Supply" includes all forms of supply of goods or services or both, such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
In the present case, PTI is evidently engaged in the organised activity of conducting professional seminars and is levying a substantial participation fee of ₹20,000. The seminar accordingly constitutes a taxable outward supply of services in the course of business, with the element of consideration clearly satisfied. What is provided to the participant is not merely classroom instruction, but a comprehensive seminar experience encompassing infrastructure, training sessions, learning materials, a conference kit, and a trolley bag.
From a Goods and Services Tax (GST) perspective, the trolley bag therefore becomes an incidental and naturally bundled component of the composite supply of training services. Consequently, the inward supply of trolley bags is directly linked to the making of taxable outward supply, thereby satisfying the basic condition of Section 16(1), which permits the input tax credit (ITC) on goods or services used in the course or furtherance of business.
This approach also aligns with judicial reasoning that Input Tax Credit (ITC) constitutes a valuable right when inputs are utilised for taxable supplies, and such credit should not be denied unless explicitly restricted by statute. The Supreme Court, in the cases of Eicher Motors Ltd. v. Union of India (1999) 106 ELT 3 (SC) and Collector v. Dai Ichi Karkaria Ltd. (1999) 112 ELT 353 (SC), acknowledged that once credit is validly earned, it becomes an integral part of the tax framework and cannot be curtailed through interpretation when the statutory conditions are satisfied. Although these principles were established under earlier indirect tax laws, they continue to guide the interpretation of input tax credit provisions under the Goods and Services Tax (GST), where Section 16 similarly confers credit, subject only to the explicit restrictions delineated in Section 17.
FAQ 1: What if the brochure does not expressly mention the trolley bag?
Even if the brochure does not list the trolley bag separately, what matters is whether the bag is, in fact, supplied uniformly as part of the seminar kit to all participants at no extra cost. If it forms part of the standard seminar deliverables, it continues to be linked to taxable outward supply and does not lose its business character merely because it is not itemised in publicity material.
Examination of Blocked Credit under Section 17(5)(g): Personal Consumption
The next issue is whether ITC gets blocked under the provision relating to personal consumption.
Statutory Extract - Section 17(5)(g), CGST Act, 2017
Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of -(g) goods or services or both used for personal consumption.
This provision is designed to deny the Input Tax Credit (ITC) where the taxable individual personally consumes goods for private or non-business reasons, such as when business assets are utilised by owners or employees for their personal requirements. In the current case, PTI does not utilize the trolley bags for any personal purposes. The bags are not employed by management or staff, nor are they taken for private use. They are acquired solely for distribution to participants as part of the seminar package, in furtherance of the institute's core activity of providing professional education services.
Therefore, there is no element of personal consumption by the registered person. The registered person does not derive any personal benefit from the goods; the benefit flows exclusively to the recipient as part of a taxable service. Providing goods to customers as part of business operations cannot, under any interpretation, be considered equivalent to personal use by the taxable individual. Accordingly, Section 17(5)(g) is not applicable.
FAQ 2: Will it make a difference if employees help in distributing the bags?
No. The mode of distribution is irrelevant. What matters is who ultimately using the goods and for what purpose. Even if employees physically hand over the bags, the use is by participants as part of business service, not by the taxable person for personal use.
Whether the Distribution of Trolley Bags Amounts to a Gift under Section 17(5)(h)
Another possible objection often raised by tax authorities concerns the provision on gifts and free samples.
Statutory Extract - Section 17(5)(h), CGST Act, 2017
Input tax credit shall not be available in respect of -(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
This necessitates an examination of whether the trolley bag qualifies as a gift. Legally, a gift constitutes a voluntary transfer of property without consideration and absent any contractual or commercial obligation. However, in this context, the participant pays ₹20,000, and the trolley bag is provided as part of the standard seminar deliverables. All registered participants receive it as part of the promised seminar kit. Consequently, the bag is not provided gratuitously or based solely on goodwill, but as part of the consideration for the supply of services.
In fact, Schedule II read with Section 7 reinforces that supplies made for consideration in the course of business constitute taxable supplies, irrespective of whether part of the value is attributable to goods or services. Hence, the trolley bag cannot be characterised as a gift or free sample, and consequently, Section 17(5)(h) also does not apply.
Judicial guidance on this matter can be derived from rulings recognising that promotional or customer-related inputs with a direct business connection are eligible for credit. In Essel Propack Ltd. v. CCE (2015) 322 ELT 769 (SC), the Supreme Court affirmed that expenses incurred to improve marketability and customer outreach have a sufficient nexus with business operations and are therefore eligible for input tax credit. Although this decision was made under the CENVAT regime, the fundamental principle of business nexus equally underpins the entitlement to input tax credit under the GST system.
FAQ 3: What if the organiser refers to it as a "complimentary gift" in communications?
Merely labelling an item as "complimentary" does not alter its legal classification when it is intrinsically associated with a paid service package. Substance takes precedence over form. If the participant lacks the option to opt out of receiving it and it is included in the standard seminar materials, it remains a taxable supply rather than a gift.
Gift vs Promotion vs Composite Supply - Understanding the Boundary Lines
At this juncture, it is advantageous to distinctly differentiate among three frequently conflated concepts - gift, promotional distribution, and composite supply. A gift entails the transfer of goods without any consideration and without any contractual or commercial obligation, such as when goods are donated to unrelated parties purely out of goodwill or charity; in such instances, Input Tax Credit (ITC) is unequivocally blocked under Section 17(5)(h).
Promotional distribution pertains to the dissemination of goods independently of any identified taxable supply, even if intended to attract future customers or reinforce brand recall, such as free samples or complimentary merchandise provided without linkage to any present transaction; in this context, ITC is typically blocked because the goods are disposed of without consideration, despite the existence of a business motive.
Conversely, composite supply arises when goods are supplied concomitantly with services as part of a single bundled package for a single consideration, exemplified by conference kits distributed in conjunction with paid seminars; in such circumstances, the goods are not gratuitously disposed of but constitute part of a taxable supply, and ITC is generally admissible unless explicitly restricted.
Fundamentally, when goods are provided with consideration and a contractual obligation, they transcend the category of gifts and promotional activities and enter the domain of composite commercial supply.
A Contrasting Situation Where ITC Would Be Blocked
It is equally important to comprehend the boundaries of appropriate distribution. For instance, if PTI, following the conclusion of the seminar, distributes trolley bags to local professionals or students who did not participate in the seminar-as a gesture of goodwill or for marketing purposes-without imposing any charges or linking the distribution to any taxable supply, such action would constitute a gift. The bags would be considered disposed of without consideration or contractual obligation. This distribution would unequivocally fall within the definition of a "gift," and accordingly, Input Tax Credit (ITC) on such trolley bags would be disallowed pursuant to Section 17(5)(h).
Likewise, if the bags are distributed to employees for personal travel, this may constitute personal consumption, resulting in denial of ITC under Section 17(5)(g). Therefore, the critical determinant is not the nature of the goods themselves, but the legal character of the transaction in which they are distributed.
Relevance of the Composite Supply Concept in Seminar Packages
The conclusion in favour of ITC is further strengthened if the transaction is viewed through the lens of composite supply under Section 2(30) of the CGST Act, 2017.
Statutory Extract - Section 2(30), CGST Act, 2017
"Composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
In the context of seminars, the primary supply comprises the training service, whereas the conference kit and trolley bag are inherently ancillary elements that complement the overall service experience. In terms of Section 8 of the CGST Act, the tax treatment of a composite supply follows that of the principal supply, and Input Tax Credit (ITC) on inputs utilised for producing such composite supplies is granted unless explicitly prohibited. Given that neither Section 17(5)(g) nor Section 17(5)(h) is applicable in this case, ITC remains accessible.
Practical Compliance Safeguards for ITC Defence
In practice, the institute should maintain proper documentation to substantiate this stance. The purchase invoice for trolley bags should list the institute as the recipient, the accounting records should classify the expense under seminar or conference costs, and seminar brochures or registration materials should specify that the conference kit is part of the participation package. Internal costing sheets or seminar budgeting records reflecting the inclusion of kit costs in participant fees may further strengthen the commercial linkage. These measures, taken together, establish a business link and help dismiss any claims of gratuitous distribution.
FAQ 4: Is separate GST required to be charged to participants for trolley bags?
No separate GST is required to be charged on the bag if it forms part of a composite supply of training service. The entire seminar fee is subject to GST at the rate applicable to the principal supply of training services, currently 18%.
Practitioner's Checklist - Safeguarding ITC on Seminar Kits and Trolley Bags
From a practical advisory standpoint, professionals evaluating Input Tax Credit (ITC) on conference kits, trolley bags, and similar seminar-related articles should carefully examine the factual and documentary matrix of each case. First, it must be ensured that the seminar or training programme itself constitutes a taxable outward supply made for consideration in the course or furtherance of business, and that the participation fee charged from attendees clearly includes the cost of all facilities and materials provided during the programme.
Second, it should be verified that the items in question are supplied uniformly to all participants as part of the standard seminar package, without offering any option to decline the kit or to pay a reduced fee. The absence of choice strongly supports the argument that the supply of such items is contractually embedded in the principal supply of training services and is not a discretionary or gratuitous distribution.
Third, procurement documentation must clearly reflect the institute as the recipient of goods, and accounting records should classify such expenditure under seminar, training, or conference costs rather than under promotional or staff welfare heads. Internal budgeting sheets showing that kit costs form part of seminar costing further reinforce the business nexus required under Section 16 of the CGST Act.
Fourth, publicity materials, registration confirmations, or participant communications should, to the extent possible, indicate that the conference kit is included in the participation package. Even if not itemised separately, any standard description of "seminar kit included" assists in establishing the contractual obligation to supply such items.
Fifth, practitioners should ensure that such goods are not diverted for distribution to non-participants, employees, or unrelated third parties after the event, as such diversion may attract the bar under Section 17(5)(g) for personal consumption or Section 17(5)(h) for gifts, depending on the nature of distribution.
Sixth, it should be verified that no separate price is charged for such items and that no independent tax invoice is raised for them, thereby preserving the integrity of the composite supply character of the seminar package under Sections 2(30) and 8 of the CGST Act.
Finally, in the event of an audit or departmental inquiry, the defence should consistently emphasise the transactional structure rather than the physical nature of goods, highlighting that the supply is a bundled professional service supported by incidental goods, and not a case of gratuitous distribution or promotional gifting.
When these safeguards are followed, the eligibility of Input Tax Credit on conference kits and trolley bags becomes not merely a matter of interpretation, but a legally defensible position firmly rooted in statutory design and commercial logic.
Business Reality and Legislative Intent - A Harmonious Reading
At a conceptual level, the law acknowledges that business promotion and customer experience constitute legitimate elements of commercial activity. When an offering is included in a contractual or commercial package, it ceases to qualify as a gift and becomes an integral part of business performance.
"जो देना भी व्यापार का हिस्सा बन जाए,वो उपहार नहीं, अनुबंध कहलाए।"When giving becomes part of a business promise, it is not a gift, but contractual performance.
Final Legal Position and Takeaway for Practitioners
Consequently, when a professional institute organises a paid seminar and offers trolley bags as part of the seminar package, all statutory conditions of supply as delineated under Section 7, along with the Input Tax Credit (ITC) eligibility criteria specified in Section 16, are fulfilled. Furthermore, the impeding provisions of Section 17(5)(g), pertaining to personal consumption, and Section 17(5)(h), concerning gifts or complimentary samples, are inapplicable. Under such circumstances, the Input Tax Credit (ITC) on Goods and Services Tax (GST) remitted for the procurement of trolley bags is deemed legally permissible. This interpretation is not only consonant with the statutory text but also reflective of settled commercial reality and accepted business practice in professional training programmes, where learning is delivered as an integrated experience rather than as a fragmented collection of services and goods.
"तिजारत में जो शामिल हो वादा-ए-सौदा,वो तोहफ़ा नहीं, पेशे की अदा कहलाए।"[When something is part of a commercial promise, it is not a gift, but professional conduct.]
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