PROMOTIONAL MATERIALS without discharged of GST?

[Guest]

Dear Experts,

We dispatch sales promotional material like T-Shirt, umbrella, grooming kit, products catalogue, price list, diary , display stand etc. to our dealers and did not discharged GST thereon. we treat this type of supply as 'NIL Rated' supply.

1- Whether Sales promotional material can be send without discharged of GST?

2- When we treated this supply as NIL Rated , whether we should be reported in Table 3.1 (c) of GSTR-3B or not?

3- If should be reported in 3B, whether ITC will have to reversed or not?

Thanks in advance

[Ethirajan Parthasarathy]

Find below answer to FAQ given by Government.

Whether advertising and communication material banners/hoardings/posters) provided to distributors would be treated as supply in the course of business by the company thereby not requiring any reversal of ITC.

1. Where the material is provided free of cost:
   This would not amount to a supply and hence no tax is payable on such transaction and in such a case credit availed by the company would need to be reversed in accordance with section 17(5) of the CGST Act, 2017.

 

2. Where the material is provided for a consideration:
   This would amount to a normal supply.

[Spudarjunan S]

Dear Sir,

Answer for your query

Q.1. Whether Sales promotional material can be send without discharged of GST?

Answer:- Refer the scenarios given below.

Q.2. When we treated this supply as NIL Rated , whether we should be reported in Table 3.1 (c) of GSTR-3B or not?

Answer:-It is not NIL rated supply. Refer scenarios given below.

Q.3. If should be reported in 3B, whether ITC will have to reversed or not?

Answer:- It should be reported in 3B as a taxable supply only if you are following 1st scenario as given below and no need to disclose in 3B if you are not following the same.

SCENARIOS:-

1. You have availed the ITC of such promotional goods:-

When you provide your promotional items free of cost, you have to pay GST based on entry no. 1 of Schedule I of CGST Act, "Permanent transfer or disposal of business assets where input tax credit has been availed on such assets".

2. You have not availed ITC of such promotional goods:-

Based on the following:-

1. Section 17(5)(h) of CGST Act which says, "goods lost, stolen, destroyed, written off ordisposed of by way of giftor free samples;"

Then the distribution of such promotional items to your customers will not tantamount to be a supply as there is no consideration for the transaction and it doesn't fall under Schedule I of CGST Act, 2017.

VALUE ADDITION:-

In the both above possible scenarios you are not benefited with ITC (even in the first scenario you need to pay GST while distributing to the customers).

However, you can plan your transaction to avail the credit for such scenarios by endorsing such promotional and branding activities to a third party service provider (whoever it can be but should be a registered person) and avail the ITC on the invoice raised by him.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Spudarjunan.

[KASTURI SETHI]

I support the views of both experts.

[KASTURI SETHI]

Explanation by Sh.Spudarjunan S. is par excellence. His understanding and interpretation is really appreciable.

[KASTURI SETHI]

De facto, there is no 'Free Lunch' in the business.

[Ganeshan Kalyani]

1. Supply of sales promotional material can be send without GST. In that case, the input tax credit , if availed, need to be reversed. Or input tax credit of promotional material should not be taken.

[SARTHAK MITTAL]

Dear Experts,

Had a query in respect of the answers posted, can't we contend that distribution of promotional items like Tshirts/pens/dairies are an expense for the business and thus wouldn't amount to supply as per scedule 1 which talks about trf of business assets.

Further, one can feel that these items if provided FOC would qualify as gifts if provided to distributors, i feel that gifts are something which are given not for the sake of deriving benefit, But in this case the company is marketing its product.

So i feel that ITC shall be eligible.

Views are invited.

AI Summary

Clarification on GST for Free Promotional Items: Not Supply, Requires ITC Reversal Under Section 17(5) CGST Act. A discussion on a forum addresses whether sales promotional materials can be dispatched without discharging GST. The initial query raises questions about classifying such supplies as 'NIL Rated' and reporting them in GSTR-3B. Responses clarify that if promotional items are provided free, they are not considered supply, requiring reversal of input tax credit (ITC) under section 17(5) of the CGST Act. If provided for consideration, they are taxable. Scenarios are discussed regarding ITC availed or not availed. Experts agree on the interpretation, suggesting using third-party service providers to potentially benefit from ITC.