Maharashtra Authority for Advance Ruling has recently ruled out the provision for the input tax credit under the gold schemes which are a sales target oriented form of business practice by the companies.
One must note that the rulings are state specific but their effect may pronounce in other states also had similar effects. As per a company dealing in the manufacturing and distribution of crop inputs and hybrid seeds asked the govt over its eligibility of input tax credit on the gold scheme by them.
The company recently announced a ‘Kharif Gold Scheme’ offering 10gm of gold coin to its customer who buys a consolidated amount of products from the company. The gold accrues 3 per cent of goods and services tax.
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The AAR ruling stated that this is a scheme and the gold coins distributed are a gift to the customer which makes them ineligible for the input tax credit on the gold coins distributed.
As per the statement of the AAR, “Input tax credit on gifts will not be available when no GST is paid on its disposal, Section 17(5)(h) of the Central GST Act mentions 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.”
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