GST reversal of on ITEMS recd from Suppliers like gold or car

[rajat solanki]

the Manufacturer gives an scheme document with terms and condition on email that upon completing certain purchases volume they would receive gold coin, cars, or trips as per Sec 15(3)(b)(ii) agreement must be present for reversing output and circular 92 says the same and 251 also that if agreement not present then no ITC to be reversed if present

First would this scheme document would be treated as agreement and if yes is ITC reversal on purchases to achieve this scheme required to be reversed proportionately

What are ingredients to treat this scheme document as an agreement

[Vijay kumar]

Sn.15(3) uses the phrase "agreement entered into". A scheme is not strictly per se an agreement entered into, but agreement need not be in writing and a scheme in force on the date of purchase of goods can be said to be agreement. 

Your query is about reversal of ITC on purchases to achieve the scheme.  

In this regard, as per Sn.34 amendment effective 1.10.2025, if Taxable value is to be reduced by way of credit note on account of such discount, reversal of ITC by the receiver for B2B and non-passing of tax incidence for B2B supplies is required.  If these conditions are not met, you cannot reduce your tax liability.

Reversal of ITC for scheme implementation is not required.

 

[rajat solanki]

they always right participation in the scheme constitutes acceptance and it is in writing and also made before the purchase is made and supplier is not reducing the output but can officer claim reversal of ITC in notice as they have done for financial credit note before

[Shilpi Jain]

The credit w.r.t. the promotion items should be eligible as it is not a gift but an obligation to pay as per the terms.

AI Summary

Agreement for promotional schemes may trigger input tax credit reversal when supplier issues credit notes reducing taxable value. A supplier's promotional scheme may constitute an agreement if it is in force at the time of purchase, and the presence of such an agreement affects whether input tax credit must be reversed. Where taxable value is reduced by a supplier's credit note, purchasers must reverse ITC if the statutory conditions for adjusting tax and passing on tax incidence are not met; conversely, one view in the discussion is that ITC reversal solely for scheme implementation is not required.