Input credit

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This discussion clarifies whether GST input credit can be claimed on expenses for business promotions, specifically gifts given to customers. The consensus is that such expenses generally qualify for input credit. Goods distributed to customers or dealers, even without a formal sales promotion scheme, are typically not considered 'gifts' under the CGST Act, 2017, especially if there's a legal obligation to provide them, akin to an oral contract.

Sonal

Sonal (Querist)

12 January 2021 Hi All

Whether GST input credit is available on business promotion expenses (Gifts purchased for customers)?
Thanks in advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

12 January 2021 Yes, it's available.
With or without a formal sales promotion scheme in place, bought out goods that are distributed to dealers, customers, etc. can, by no stretch of imagination, be treated as 'gifts' within the meaning of Section 17(5)(h) of the CGST Act, 2017. As we know, under the Indian Contracts Act, 1872, even oral contracts are recognized and are enforceable and what is more important is the concept of 'consensus ad idem'. So long as it is agreed that companies distributing these goods are legally obligated to do so, these goods cannot be treated as 'gifts' at all.

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