Gold Schemes Offered to Customers not eligible for GST Input Tax Credit: AAR [Read Order]

Gold Jewelry - provisional release - Delhi HC - Taxscan

The Maharashtra Advance Ruling Authority (AAR) has ruled that the companies cannot avail input tax credit under the GST regime in respect of Gold Schemes offered to the customers to promote business.

The applicant, Biostadt India Ltd is a company engaged in manufacturing and distribution of crop inputs and hybrid seeds. They launched a scheme, namely, 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).

The applicant approached the authority seeking a ruling on whether the gold scheme announced by them eligible for input tax credit.

The authority held that since the scheme amount to gift, the company cannot claim input tax credit on the procurement of gold coins, which are to be distributed to customers.

“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.”

“To sum up ITC on “gifts” will not be available when no GST is being paid on their disposal. Just because the applicant submits that they have satisfied Section 16 (1) of the CGST Act 2017 does not mean that they are entitled to credit since Section 17(5) starts with “Notwithstanding anything contained in sub-section (1) of Section 16 “. The implication is that in the subject case even if it seems, as per the applicant, that Section 16 (1) is applicable in their case and allows them credit, Section 17(5) shall block such credits.”

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