ITC ON BUSINESS PROMOTION SCHEMES

[Deepak Garg]

SIR

ONE OF MY CLIENT DEALS IN TRADING OF TEA AND HE GIVES BUSINESS PROMOTION SCHEMES TO THE DEALERS / CUSTOMERS. MY QUESTION IS WHETHER HE IS ELIGIBLE FOR ITC ON SCHEME ITEMS SUCH AS LED, MOBILE SET AND OTHER ELECTRONICS ITEMS.

[Ganeshan Kalyani]

Promotion expense is done to increase the turnover of the business. Thus promotion expense incurred is in course and for furtherance of business. Hence , input tax credit is eligible. However, if any gift item is given to customer then input tax credit is not allowed.

[Deepak Garg]

SIR,

IN BUSINESS PROMOTION WE GIVES LED TV FREE OF COST AGAINST A SCHEME OFFERED TO THE PURCHASERS.PLAESE COMMENTS AGAIN.

[Ganeshan Kalyani]

Sir, credit is not allowed on items given free.

[ANITA BHADRA]

As free promotional item is given without any price, the credit shall be reversed because the entire transaction is free of cost. Although company may get order in bulk in future but that cant be directly

In GST law it is clearly given that when something is given as free sample then its credit will be disallowed.related to this transaction.

In my opinion in case free samples the your client is not eligible for ITC on scheme items

[CSSANJAY MALHOTRA]

Promotional Items if any given alongwith (not separate) with the product forms part of consideration received for the supply of product and accordingly ITC is available in those cases.

Hence each case is to be dealt as per the facts.

[KASTURI SETHI]

We call the items free but virtually it is not free. It is an eye wash. The cost of free items are always included in the price of main product.

[CSSANJAY MALHOTRA]

Sh. Kasturi ji,

Completely in agreement with you and hence the cost of promotional items i.e. Buy 1 Get 1 free signifies that the Sales price is for 2 products and not one. Can;t be termed as FOC supplies. Maximum it can be termed as Invoiced Qty, Discount Qty and Billed Qty for valuation.

[YAGAY and SUN]

Input Tax Credit needs to be reversed in such scenarios.

AI Summary

Input tax credit on promotional gifts may be disallowed unless cost is included in consideration for the supply.
Eligibility for input tax credit on promotional scheme items depends on treatment of the supply: if promotional goods are treated as free samples or gifts provided without consideration, ITC must be disallowed or reversed; if the cost of the promotional item is included in the price or the item is bundled with the main supply (e.g., buy one get one) and thus forms part of consideration and invoicing, ITC may be available.