vat credit on goods purchased for gifts to staff etc

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monish (Querist)
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07 May 2010 Sir,
I would like to know whether input vat credit is available on goods purchased specifically for the purpose of gift. For eg. gold coins purchased to give diwali gifts to clients and staff.

thanking you,

Vishnu Saboo

Vishnu Saboo (Expert)
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14 May 2010 question is comflicting the facts.
on side u are saying goods purchases for sale on the other had u r saying it was for gift?
input credit is avilable only where if good is your input.

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monish

monish (Querist)
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14 May 2010 Sorry sir,
I meant to say goods purchased for giving gift. would vat paid on such goods be available for set off.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Hey! About VAT credit on goods purchased specifically as gifts (like gold coins for Diwali gifts to clients and staff):

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### Can you claim VAT credit on goods bought for gifts?

* **Input VAT credit is generally allowed only on goods purchased as inputs for your business — i.e., goods you sell or use in manufacturing/supply of taxable goods/services.**

* **Goods bought purely as gifts or for personal use are NOT considered business inputs.**

* Therefore, **VAT paid on goods purchased solely for gifts to clients or staff is usually NOT eligible for input tax credit.**

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### Why?

* VAT credit is intended to avoid tax-on-tax (cascading) only for goods used in the course of business.
* Gifts, especially luxury items like gold coins, are treated as **non-input or non-business use**.
* Most state VAT laws disallow credit on goods not used in taxable business operations.

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### Practical implications:

| Purpose of Goods Purchase | VAT Credit Eligible? |
| ----------------------------------------- | -------------------- |
| Goods purchased for resale or manufacture | Yes |
| Goods purchased for gift to clients/staff | No |
| Goods purchased for personal use | No |

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### What to do?

* You should treat VAT on gifts as a business expense **without claiming input credit**.
* Properly disclose this in your accounts to avoid disputes with tax authorities.

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If you want, I can help you check your specific state VAT Act sections or draft a clarification request to your tax officer.

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