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Eligibility of ITC Diwali gifts..

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Nrusingh Beura

55 Points Posted on 22 May 2020

Dear member, we purchase dryfruits packet and distribute it to our customers during diwali as a business promotion expense, is it ineligible as per sec 17(5). please suggest..

Replies (8)

Quick Summary

This discussion clarifies the eligibility of Input Tax Credit (ITC) on Diwali gifts distributed to customers as a business promotion expense. According to Section 17(5)(h) of the CGST Act, 2017, ITC is generally blocked on gifts, especially if no GST is paid upon their disposal. Even with a tax invoice showing GST, the credit cannot be claimed if the goods are distributed as gifts. The core principle is that if you don't pay tax on the disposal of goods (like gifts), you cannot claim ITC on their procurement.

Aashok Kumar Sharma

Finance/Compliance Consultant

69623 Points Posted on 22 May 2020

ITC not admissible on procurement of Gifts. ITC not available on gifts' when no GST is being paid on their disposal, section 17(5) of the CGST Act, 2017 blocks such credits: AAR

Nrusingh Beura

55 Points Posted on 22 May 2020

Sir, Supplier also charge gst and we have tax invoice with gst breakup

jashwanth

CA-PRACTICE

400 Points Posted on 22 May 2020

We can't claim input when the goods are distributed as sample , gift, damage as per 17(5)

Pankaj Rawat

GST Practitioner

55067 Points Posted on 23 May 2020

A conjoint reading of Section 17(5)(h) of CGST Act, 2017 and Schedule I to CGST Act if the goods are disposed of by way of gift, section 17(5)(h) of
CGST Act, 2017 shall be applicable and accordingly input tax credit in respect of the same shall not be allowed

Roma jain

7 Points Posted on 23 May 2020

As per section 17 (5) we can't claim input tax when we are distributed gift.

Aashok Kumar Sharma

Finance/Compliance Consultant

69623 Points Posted on 23 May 2020

The main concept is if you are not paying tax on its disposal then ITC is not allowed be it like, Free Samples, Gifts, Loss of Goods, Fire, Theft etc

Rajkumar Patel

602 Points Posted on 23 May 2020

If your gift amount More than 50,000 Rs per employee per annum, GST is levied on such supply Without any Consideration under schedule 1 and Paid gst on inward supply of such good can also not be claimed.