Businesses are eligible to claim input tax credits(ITC) for items such as gold coins and white goods when acquired for distribution to dealers as part of promotional schemes upon reaching specific sales targets, according to a ruling by the GST Advance Ruling Authority.

The Karnataka branch of the Authority for Advance Ruling (AAR) determined that input tax credits(ITC) can be utilized for taxes paid when procuring white goods or gold coins meant for incentivizing dealers, as this constitutes a supply.

Orient Cement Ltd had sought a ruling from the AAR to ascertain whether input tax credits could be applied to the distribution of gold coins and white goods to its dealers upon reaching predetermined targets outlined in the promotional scheme. The company also offers various promotional programs, including the “Monthly/Quarterly Quantity Discount Scheme,” to aid in reaching sales and collection objectives.

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The AAR observed that the applicant issues these gold coins and white goods as incentives as per the agreement made between them and the recipients. These items are issued with specific conditions and stipulations, making them distinct from unconditional gifts. Therefore, they do not fall under the category of ‘gifts.’

The AAR further clarified that the obligation of the applicant to provide gold coins and white goods to dealers/customers upon meeting the specified material purchase targets during the scheme’s duration should not be considered as “goods disposed of by way of gift.” Consequently, ITC would not be restricted, as stated in the order dated August 24.

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