gst: New Year calendars, pens, bags, diaries gifted or given for brand promotion now under GST – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/policy/new-year-calendars-pens-bags-diaries-gifted-or-given-for-brand-promotion-now-under-gst/articleshow/79992596.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23Synopsis

Input tax credit on any brand promotion item (goods) where name of a company is mentioned would attract GST, Karnataka Authority for Advance Ruling (AAR) said in a ruling recently.

Mumbai: The year 2021 has got its first goods and services tax (GST) complication. A question mark has been put on the treatment of year gifts or brand promotion goods such as pens, calendars, bags or diaries under the GST framework.

Any goods – including even a carry bag– that are given as brand promotion or on which a company’s brand is embossed will come under the purview of GST.

Input tax credit on any brand promotion item (goods) where name of a company is mentioned would attract GST, Karnataka Authority for Advance Ruling (AAR) said in a ruling recently.

As per the details of the case Page IndustriesNSE 0.38 % limited gets some of these goods manufactured and then “shifts” them to showrooms of distributors or dealers. These branded diaries or calendars are then displayed at the showrooms. When the company procures these materials (before sending them to its suppliers) it pays GST on them and even avails input tax credit, a tax note by Asire Consulting reads.

The Applicant approached the AAR on whether input tax credit can be availed on procurement of such items.

“Distributable goods which are given to the Franchisees of the Applicant, i.e., related parties, the supply would amount to supply and therefore GST will be charged, as per para 2 of schedule I, and input tax credit can be availed. Distributable goods which are given to others, will not entitle the Applicant to avail GST paid as input tax credit. The procurement of “non-distributable” products qualify as capital goods and not as “inputs” and the Applicant eligible to claim input tax credit on their procurement, but in case if they are disposed by writing off or destruction or lost, then the same needs to be reversed,” the AAR ruled

Under the GST framework nothing is free. That is any transaction, even if it has no value in money, comes under the gamut of GST—unless specifically exempted under the law or by the government.

The issue had even arisen on the free samples that companies give to their suppliers. That is how to value something that’s free—for instance a spoon given free with toothpaste. The issue was resolved later on after several clarifications.

GST has a system of input tax credit whereby taxes paid on raw materials (or on input services) can be recovered once the finished goods are sold. This recovery could happen through input tax credit that can be set off against future tax liabilities.

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