GIFT UNDER SALE SCHEME

[mohan sehgal]

We have floated a Quarterly scheme to our dealers ....... On an aggregate purchase of our goods amounting to ₹ 6 lakhs per quarter;we will conduct a lucky draw amongst our dealers ;who are eligible(bought goods worth ₹ 6 Lakhs) and award a Two Wheeler as a Prize to the lucky winner among the eligible dealers.

Would we able to book ITC on The GST paid on the TWO WHEELER Price..given as a gift to the dealer who has bought the fixed amount of goods within the stipulated period of time.Please note that this gift is directly related to the invoiced amount of goods.

[KASTURI SETHI]

Dear Querist,

Answer is , 'NO'.

In terms of Sec. 17(5)(h) of CGST Act, you are not entitled to input tax credit of goods which are disposed of as gifts by way of promotional scheme or otherwise. Law is very much clear on this issue

Sec. 17(5) : Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of Section 18, input tax credit shall not be available in respect of the following, namely :-

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples;

Thus in view of above definition it is opined that Input tax credit attributable to purchase of promotional items is not available.

Pl. read the legal definition of 'gift' and how it is applicable under GST Acts.

[mohan sehgal]

The gift is being given against an agreement on record...

As far as I understand if an obligation attached to an agreement of sale is attached...the commodity loses its identity as a "GIFT" and no denial of ITC can arise under section 17(5) in such cases.

The dealer is entitled to the commodity described as a GIFT,only when achieves the sale target within the stipulated period..

Sir,Please elaborate.THANKS

[KASTURI SETHI]

If it is so, it has to be examined afresh in view of your views.

[DR.MARIAPPAN GOVINDARAJAN]

No. You yourself admitted it is a gift. It is not an obligation of future contingencies.

[KASTURI SETHI]

Dear Querist, Change your strategy to get legal benefit as per law. The word, 'gift' here cannot be digested. Hope you understand what I want to say.

[mohan sehgal]

Thanks...

If we change the title of the scheme to" Sales Incentive Scheme" ??????

[DR.MARIAPPAN GOVINDARAJAN]

In your agreement grant of incentive/discount is to be mentioned. The same should be indicated in the invoice. Then it is exempted.

[KASTURI SETHI]

After agreement with the views of Dr.Govindarajan, Sir, I am of the view that the following AAR may help you in understanding incentive scheme:-

2018 (15) G.S.T.L. 455 (A.A.R. - GST) = 2018 (7) TMI 1761 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA IN RE : ULTRATECH CEMENT LTD.

AI Summary

Company's Two-Wheeler Gift Scheme Faces ITC Denial Under Section 17(5)(h); Rebranding Suggested for Tax Benefits A company introduced a quarterly scheme offering a two-wheeler prize through a lucky draw to dealers purchasing goods worth 6 lakhs. The query raised was whether Input Tax Credit (ITC) could be claimed on the GST paid for the two-wheeler, considered a gift. The response highlighted that under Section 17(5)(h) of the CGST Act, ITC is not available for goods disposed of as gifts. The discussion suggested rebranding the scheme as a 'Sales Incentive Scheme' and including the incentive in the agreement and invoice to potentially qualify for ITC.