Is ITC Available on Diwali Gifts?

With the implementation of GST, the taxability and availability of Input Tax Credit on Gifts  have always been a matter of discussion.  The gifts are provided by the business entity for the purpose of advancement of business or for sales promotion. Different types are gifts are given for the furtherance of business. The law has tried to include some specific provisions relating to gifts under GST. We have narrated Diwali Gift and Input Tax Credit treatment for the same. (However, there are still some unresolved problems which may lead to controversy in the near future).

  • Diwali Gift to employees

The gifts to employees exceeding Rs. 50000 are specifically covered under Entry No.2 of Schedule I. Hence, gifts to employees up to the value of Rs.50000 will be considered as gifts and the ITC on the same is required to be reversed as per Section-17(5).

  • Diwali Gift to Business Client

It is a gift provided on an occasion to the client & it does not lead to business promotion, rather it is provided for maintaining good relation with the client. Due to no involvement of consideration & contractual obligation, it may fall under the definition of gift and ITC on the same needs to be reversed as per Section-17(5)of CGST Act.

  • ITC on sweets and beverages

 ITC on food and beverages comes under blocked credit as per section 17(5). Hence ITC is not available on foods and beverages purchased for employees and workers.


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