GST Paid for customer gift articles is eligible for ITC
This query is : Resolved
22 September 2020
It is our usual practice to give gift to give our customers at the time of Deepavali and also occasionally at the time of their visit to our factory.
We are purchasing the gift articles through tax invoice and we are asking experts whether we are eligible for taking ITC GST as per tax invoice.
In our view, the customer gift expenses is furtherance to business and we are eligible to take ITC GST.
We request expert opinon for the above.
It is our usual practice to give gift to give our customers at the time of Deepavali and also occasionally at the time of their visit to our factory.
We are purchasing the gift articles through tax invoice and we are asking experts whether we are eligible for taking ITC GST as per tax invoice.
In our view, the customer gift expenses is furtherance to business and we are eligible to take ITC GST.
We request expert opinon for the above.
22 September 2020
Under section 17(5) ITC is not allowed on goods given as free gift. This is not considered as supply as their is no consideration.
However, you mention that you are giving free gift to customers on the occasion of festivals. So it can be a business promotion of your product/services in the furtherance of business. So you can take the stand that the cost of such samples is always built in the product cost which you sell to customer and thus may not reverse ITC. However, this is a having exposure to litigation so depending upon the amounts involved you can take a decision.
However, you mention that you are giving free gift to customers on the occasion of festivals. So it can be a business promotion of your product/services in the furtherance of business. So you can take the stand that the cost of such samples is always built in the product cost which you sell to customer and thus may not reverse ITC. However, this is a having exposure to litigation so depending upon the amounts involved you can take a decision.
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