Free Supply of Goods Under GST

[Guest]

Respected Sir / Madam

We are into business of manufacturing Detergent Powder meant for daily basis use of common people. We frame many promotional schemes to consumer's, retailers, dealers, etc to compete & survive in the market.

Promotional items are given to motivate them on fulfillment of terms of the schemes. The schemes once completed are mostly given in Kinds. We purchase these Schemes items for distribution to our Consumers & Sellers. Also our products are mostly designed with consumers's offer i.e. coupon's mentioning items are inserted in the Detergent packets. Once a consumer buyes & opens a packet they get the coupon & collects the mentioned item from of Sellers.

We want to know that whether we are eligible of Input Tax credit on the purchase of such items.

,

[Ganeshan Kalyani]

Sir, input tax credit is not allowed on the goods given away for free. You cannot claim input tax credit of the tax paid on purchase of those coupons.

[KASTURI SETHI]

I support the views of Sh.Ganeshan Kalyani Ji. Such availment is not allowed under Section 17(5)(h) of CGST Act.

EXCLUSION CLAUSE

"Section 17(5) (h) : goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and

[Shilpi Jain]

As I understand there are 2 legs to this. One is to dealers under target schemes and the other is for end consumers. There is a possibility of getting credit for dealers related schemes.

Also on a better understanding of the scheme with the consumers, the ITC eligibility can be examined. Please have a look at the article to get some basic understanding on discount and other schemes and the credit eligibility.

https://www.taxtmi.com/article/detailed?id=8992

https://hiregange.com/a/implications-of-various-discount-and-promotion-schemes#

[KASTURI SETHI]

2019 (26) G.S.T.L. 374 (A.A.R. - GST) = 2019 (6) TMI 1305 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA IN RE : SANOFI INDIA LIMITED

[Bhavika Chothani]

You cannot claim ITC on free supplies

AI Summary

Input Tax Credit denied for goods supplied free as gifts or samples under GST, with dealer-scheme exceptions requiring assessment. Input tax credit on promotional goods given free to end consumers is generally disallowed because the statutory exclusion for goods disposed of as gifts or free samples denies credit on purchases of coupons and promotional items. However, supplies made to dealers under target or incentive schemes may warrant separate ITC analysis based on scheme mechanics and recipient treatment; parties should examine scheme specifics and advance ruling practice to determine entitlement.