Gold Schemes Offered to Customers not eligible for GST Input Tax Credit
The Authority for Advance Ruling (AAR), Maharashtra, has ruled against Input Tax Credit for the gold schemes, offered by companies to its customers. It is done to encourage them to meet the business targets. Therefore, companies cannot avail input tax credit under the GST regime in respect of Gold Schemes offered to the customers to promote its business.
The applicant Biostadt India Ltd, is a company engaged in manufacturing and distribution of crop inputs and hybrid seeds. The company had approached AAR on whether a Gold Scheme announced by it would allow it to claim Input Tax Credit.
The company had come out with a ‘Kharif Gold Scheme, 2018’ under which it offers 10 gm of gold coin to anyone buying a stipulated amount of products from it. Similarly, anyone buying these products worth a minimum sum was offered eight grams of gold coin. Gold attracts a 3 per cent goods and services tax (GST).
AAR ruled that the company cannot claim Input Tax Credit on procurement of gold coins, which are to be distributed to customers.
It treated the scheme as gifts. “Input tax credit on gifts will not be available when no GST is paid on its disposal,” it said.
AAR relied on the Section 17(5)(h) of the Central GST Act, which says, “…input credit shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.”
There had been a long-drawn debate on the scope of the term ‘gift’ and the government should consider issuing an appropriate clarification on the same and credit eligibility on such spending.
To sum up ITC on ‘gifts’ will not be available when no GST is being paid on their disposal.