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A distributor is asking whether they can claim Input Tax Credit (ITC) on GST paid to a third party for sales promotion and advertising activities. The third party has issued an invoice with 18% GST under HSN code 998599. The advice given is that ITC can be claimed, but it should be accounted for as a sales promotion expense rather than added to total purchases, as it doesn't correspond to a direct purchase of goods for trading.

Tushar Tulsian

Tushar Tulsian (Querist)

17 March 2021 Dear Sir,
We are distributor. We had highered third party on our behalf for do sales promotion activities and advertisement . In return third party issue service invoice with18%gst under hsn code 998599. My question is that Can we avail the Input Tax Credit on GST which is paid to party.
And can we add it to our total purchases

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

17 March 2021 Yes, ITC can be claimed on such sale promotion expenses.
Don't add it to total purchase. Add it to sale promotion expenses.

Tushar Tulsian

Tushar Tulsian (Querist)

17 March 2021 Sir
We have increased our sales price by 1%
And invoice raised by the third party is. Also equivalent to our 1% of our sales that we increased
If we take it as promotional expense than our GP ratio increase
So please tell if it is possible we take it as purchase of service and show with other purchases in which we r trading

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

17 March 2021 If treated as purchase there will not be corresponding sales. So it's only sales promotion expenses.

Tushar Tulsian

Tushar Tulsian (Querist)

30 June 2021 Sir please check the link

Read more at: https://www.caclubindia.com/forum/how-to-raise-invoice-576864.asp

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