ITC eligibility on Sales promotion

[suresh sathyamurthy]

Dear Expert

kindly clarify on below two points

a) Along with garments box packing, perfumes or watch etc is packed and given as sales promotion item, billed only for garments, perfume or watch is not charged in invoice since it is sales promotion item, can ITC be claimed for perfumes or watches since the price of the sales promotion is added in the price of the garments. (please provide circular or notification or AAR)

b) Mannequins or display items are purchased and sent to the franchisees to enable the franchisee to display our products, while sending those items we have billed the franchisees at a nominal price of ₹ 1 can the ITC be claimed for the corresponding purchase.

please clarify on the above two points

[KASTURI SETHI]

Sh.Suresh Sathyamurthy Ji,

Query-wise reply is as under:-

1. YES. See C.B.I. & C. Circular No. 92/11/2019-GST, dated 7-3-2019 word for word.

2.YES.

[Ganeshan Kalyani]

Yes, the ITC is eligible on sales promotion.

[Shilpi Jain]

In case of scenario 'a' it would be better if you can add the value of the free goods given and ensure a discount is given for the value of the promotion goods.

There was the recent advance ruling of the Kolkata AAR.

[suresh sathyamurthy]

Thanks you all for your opinion & advice

AI Summary

Input tax credit eligibility on promotional goods affirmed where embedded cost in sale price is properly valued and documented. Input tax credit (ITC) on promotional goods packed with principal goods is eligible where the promotional cost is embedded in the sale price and properly accounted; authorities and an advance ruling are cited. Similarly, ITC on display items or mannequins supplied to franchisees at nominal prices is regarded as allowable provided the transfer is documented and the value is reflected as an invoice adjustment or discount to support the tax entitlement.