Credit of GST for Airconditioner given for acheiving Target

[JATIN SHAH]

We have issued a scheme that if a distributors achieves sale of 10 lacs we will give him Air conditioner. co. is situated at Maharashtra and distributor is in Karnataka. if we buy AC from Karnataka with bill in the name of Company in Maharashtra can we claim credit in GST in Maharashtra.

[Rajagopalan Ranganathan]

Sir,

According to Section 17 (5) (h) of CGST Act, 2017 "notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

The air-conditioner provided by you can be considered as a gift for achieving sale of 10 lacs. Though it can be equated to cash discount in the form of air-conditioner the value of the same cannot be treated as cash discount and claimed as a deduction from the transaction value. This is my opinion. I invite other experts to convey their esteemed opinion in this matter.

[JATIN SHAH]

Dear Sir,

Thanks for the replay, Can we take credit of GST charged on invoice of Air condition?

[Ganeshan Kalyani]

Sir, the provision clearly provides that ITC on goods given away free is not eligible for credit.

[KASTURI SETHI]

The reply of Sh.Ranganathan, Sir is very much clear. Credit not allowed. This is not discount . It is post sale or post supply incentive. It is out of the definition and scope of discount because such incentive does not conform to the parameters of Section 15 of CGST Act. It cannot be termed as 'prior known'. There is element of uncertainty whether sale target will be achieved or not. Hence neither discount admissible nor ITC is admissible.

[Himansu Sekhar]

First thing, the bill will mention, cgst and sgst of Karnataka, the said credit of cgst and sgst will not be available in Maharashtra.

Second thing, in the case of free samples, FAQ has been released which mentions about reversal of credit. The same analogy if applied here, credit will not be available. Moreover the supply is without any consideration.

Third thing, if it is a bundled package, credit need not be reversed. But it is not a bundled package, rather independent supply. My view, credit will not be available

[KASTURI SETHI]

Replies by all experts stamp the original reply posted by Sh.Ranganathan, Sir. Concept must be clear to the querist completely.

[Ganeshan Kalyani]

Marketing expenses like advertisement , campaigning etc is an eligible credit. However, Tv or any other item given away as such will not qualify for credit.

AI Summary

Input tax credit on goods given as gifts is not available, so ITC cannot be claimed for post sale incentives. Input tax credit on goods provided as a post sale incentive or gift is not available. An air conditioner given to a distributor for meeting a sales target is treated as a gift or free supply and not as a deductible cash discount; accordingly ITC on the tax charged cannot be claimed. If tax is charged in one State, that tax will not be claimable in another State's returns. Bundled supplies may present a different treatment, but an independent giveaway requires reversal or denial of credit. Marketing expenses like advertising remain eligible for ITC.