ITC on promotional expenses

[Ashish Diwedi]

Whether GST is applicable on Gold coins / Watches given to business associates as a promotional expense during Diwali?

Can ITC be claimed of GST charged on Gold Coins / Watches?

[Shilpi Jain]

If not in the nature of gifts I.e. if it can shown to be an obligation to give such items, ITC can be claimed. Nothing is free in business.

[KASTURI SETHI]

(i) Yes. GST is payable on such promotional expenses.

(ii) Regarding availment of ITC on such promotional expenses, pl. go through the following decisions of AAR :-

2019 (29) G.S.T.L. 789 (A.A.R. - GST) = 2019 (10) TMI 568 - AUTHORITY FOR ADVANCE RULING, KARNATAKA IN RE : SURFA COATS (INDIA) PVT. LTD.

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

2019 (22) G.S.T.L. 551 (A.A.R. - GST) = 2019 (3) TMI 540 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA IN RE : BIOSTADT INDIA LIMITED

[Himansu Sekhar]

1. First decide whether they are related persons or not under sec. 15.

2. If yes, taxable even if no consideration is received and ITC allowed.

3. If not, if a free gift without any consideration, no GST and no ITC allowed

AI Summary

GST on promotional gifts: Taxable when supplied to related parties and ITC may be claimed; free gifts not taxable.
GST and ITC on promotional items hinge on recipient relationship and transaction character: transfers to related persons are taxable even absent consideration and permit ITC; transfers arising from an obligation or business necessity may allow ITC; genuine free gifts to unrelated parties are not taxable and do not permit ITC. AAR decisions cited in the discussion corroborate these positions.