Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Diwali gifts input credit

Himanshu Gupta (Director) (32 Points)

18 October 2017

I've purchased gifts and sweets for both my staff and customers. Can i avail input credit in both cases?

Reply
Follow
Share

5 Replies

(Guest)

As per section 17(5) of GST Act, pertaining to block credits for goos purchased, input tax credit on goods purchased and disposed off or written off by way of gifts or free samples cannot be availed off. so credit cannot be availed on gifts and sweets purchased.

VIKAS SAINI (1157 Points)
Replied 18 October 2017

Can we take the input on hotels room and fooding bill

(Guest)

If the expense is for the purpose of business i.e it should not be in personal nature. only then ITC can be taken..and if you want to take ITC over hotel room and fooding bill, then you should also provide your GSTIN to the hotel,only then you an take ITC over the bill provided by them.

saurabh jain (manager) (174 Points)
Replied 31 October 2017

Mr Nachiket bhat ji now question comes that as per clause (h) of section 17(5) of cgst act 2017 , the input tax credit with respect to goods disposed of by way of gifts shall not be allowed, The definition of goods as per section 2(52) means every kind of movable property........ which are agreed to be served before supply or under a contract of supply. in order to call a commodity as goods, it is necessary that they are used for the purpose of supply. To call a particular transaction as a supply it should have consideration involved or the same should be mentioned under schedule 1of the act. There is neither any consideration nor is there any reference of gifts under schedule 1 except of those given to employees. in such circumstances, these Diwali gifts move out of the ambit of Goods from the perspective of business unit purchasing such gifts. it should be noted that the same Diwali gifts shall be treated as supply of goods for vendor who have sold such gift's as per section 16 what is required is that there should be tax charged on supply of goods by a vendor to tax payer. it nowhere restrict that such items which are purchased should also qualify as goods for the purchaser. therefore it can be construed that Diwali gifts fulfill the consideration of section 16 for claming of input tax credit

1 Like

Devendra (Partner in Dhadda anc Company - Jaipur) (22 Points)
Replied 05 November 2018

Saurabh Ji

I am replying to the post which is an year old. However it is trending in this Diwali as well and I think I should update my views which go as under: -

I guess the definition of goods has been misinterpreted. The Definition goes as under: -

“goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;

It is severed and not served - severed means cut - The word has been used in connection with growing crops, grass and things attached to earth.

These are treated to goods even when they are not movable until they are cut before supply or cut under a contract.

and therefore the word severed is not connected with supplying the goods to be classified as goods.

Thus when diwali gifts are purchased they are goods and will remain goods even if we supply it further or not. As far as ITC is concerned it will remain blocked under 17(5)(h) since the goods per se are disposed of as gifts.

Any other views are most welcome.

Thanks

CA Devendra Kataria

Kota (Rajasthan)