How is ITC Applicable on Diwali Gifts?
Diwali is indeed the most propitious occasion for everyone in India. It is time to cherish by the way of gifting and celebrating with your family, friends, employees, and clients.
There’s no contradiction to the fact that the auspicious gifts have utmost in our culture. Gifts are not just an integral part of the Indian tradition, they do act as a souvenir of every relationship, be it a familial bond or a professional link.
However, we need to consider the applicability of Input Credit on the Diwali presents. So, let us have a look at whether ITC is available for the purchase of Diwali gifts for vendors, customers or consultants.
#1. How is Input Credit applicable on the Diwali gifts?
It is important to note that the gifts given on Diwali are conditionally applicable for Input Tax Credit under GST.
#2. How to ascertain whether ITC is available for Diwali gifts?
- To determine whether ITC is available for Diwali gifts, we need to refer to Section 16 of the CGST Act 2017.
- As per Section 16 of the CGST Act 2017, a taxpayer is entitled to avail Input Tax Credit on GST charged on the supply of goods or services which are used in the course of furtherance of business.
#3. What does it mean “in course of furtherance of a business”?
As per the GST laws, the phrase ‘in the course of furtherance of business’ means any act of advancement or promotion of business, whose purpose is the sustained growth and profitability of the business.
#4. How is ITC applicable to Diwali gifts are given to business clients?
Diwali gifts are given to the individuals related to business, including the clients is for the good cause of the business relations. This further helps in the advancement of business.
- Hence, gifts given to business clients satisfy the conditions of Section 16 of the CGST Act. Thus, Input Tax Credit on GST charged on such gifts shall be available.
- Moreover, it must be noted that Diwali gifts shall be considered as the supply of goods for the vendor who has the GST registration and has sold such gifts.
- Now, GST shall be charged by the vendor on the said gifts. Hence, the Diwali gifts fulfil the condition of Section 16 and ITC can be claimed.
#5. How is ITC applicable to sweets & beverages gifted to employees on Diwali?
To know whether Input Tax Credit is available on food & beverages gifted to employees on Diwali, we now need to refer to Section 17(5) of CGST Act 2017.
- The food & beverages gifted to employees come under the category of blocked credit u/s 17(5) of CGST Act 2017.
- Hence, ITC is not available on foods & beverages bought for gifting to employees and workers.
#6. How is ITC applicable to Diwali Gifts given to employees?
Evidently, Salary payable to employees shall not attract GST as it is not treated as Supply.
To know about the applicability of ITC on Diwali Gifts given to employees, we need to refer to the notification by the Ministry of Finance dated 10th July 2017.
As per the Ministry of Finance notification,
- Gifts given by employer exceeding the value of â‚¹50,000/- shall attract GST.
- Accordingly, the high-value gifts given to employees such as a car, home, plot, gold, jewellery etc on Diwali whose value exceeds â‚¹50,000/- is liable to GST.
However, the Input Tax Credit is NOT available on such products gifted to employees, as the said gifts are not given for the furtherance of business.
With that, we wish all our clients a Very Happy & Prosperous Diwali!
If you need any sort of assistance related to the process of getting a GST registration procedure, feel free to contact our business advisor at 8881-069-069.
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