Input tax credit on items bought for distribution to dealers can be claimed

Businesses can claim input tax credit on items, like gold coins and white goods, procured for distribution to dealers upon achieving pre-specified sales targets as a part of promotional schemes, a GST advance ruling authority has ruled. The Karnataka-bench of the AAR (Authority for Advance Ruling) has ruled that ITC can be availed on taxes paid for procurement of white goods or gold coins for the purpose of incentive to dealer as it is a supply. 

Orient Cement had approached the AAR seeking ruling in whether ITC can be claimed on distribution of gold coins and white goods to its dealers upon achieving a specified target fixed under the scheme. The company had also offers various promotional schemes “Monthly, Quarterly, Quantity and Discount Scheme. The said sales promotion scheme helps the company in achieving their sales and collection targets. 

The AAR noted that the applicant was issuing these gold coins and white goods so procured as incentives according to the agreement reached between himself and the recipients. It is only issued subject to the fulfilment of certain conditions and stipulations. “Gift is something which is given without any conditions and stipulations and hence the same cannot be covered under the scope of ‘gift’,” it said.

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