How to Claim Input Tax Credit on Gold Coins and White Goods: A GST Ruling on Business Incentive Schemes

The GST advance ruling authority has determined that businesses can avail of input tax credits for items such as gold coins and white goods when they are acquired for distribution to dealers as part of promotional schemes linked to specific sales targets.

The AAR's Karnataka bench has stated that Input Tax Credit (ITC) can be claimed for taxes paid when purchasing white goods or gold coins intended as incentives for dealers, considering it falls under the category of supply.

Orient Cement Ltd approached the AAR to clarify whether it could avail Input Tax Credit (ITC) for distributing gold coins and white goods to its dealers when they achieve specific sales targets outlined in the scheme. 

The company also runs various promotional schemes such as the "Monthly/Quarterly Quantity Discount Scheme," among others.

The company's sales promotion scheme assists them in reaching their sales and collection goals.

The AAR observed that the applicant provides these gold coins and white goods as incentives based on agreements with the recipients. These items are given with specific conditions and requirements. 

The AAR clarified that a "gift" is something given without any conditions or stipulations, and therefore, these incentives don't fall under the definition of a "gift."

The AAR, in its order dated August 24, clarified that the applicant's responsibility to provide gold coins and white goods to dealers or customers upon meeting the specified purchase targets during the scheme period does not fall under the category of "goods disposed of by way of gift." Consequently, input tax credit would not be restricted in this scenario.

 

Also Read: Taxation on Gifts u/s 56(2)(x)(b) of Income Tax Act, 1961

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