ADITYA RAJ DAS / NEW DELHI
The All India Tax Advocates’ Forum (AITAF) has urged the Finance Minister to allow assesses to avail input tax credit on sale transactions under promotional schemes like “buy-one-get-one-free” deals.
“Withdrawal of input tax credit under the new GST regime will severely impact the sales and marketing cost of companies which follow the system of free samples or free supply strategy such as buy-one-get-one-free schemes,” the AITAF President M K Gandhi said in a statement issued here.
According to section 17(5) of the CGST Act, an input tax credit will not be available for goods given as gifts or free samples. Thus, if the taxpayer avails the input tax credit on account of purchase of goods and later gives these goods as free samples, the input tax credit will be reversed.
Prior to the introduction of the new tax regime of GST, products given free of cost were not liable to VAT and dealer was entitled for input tax credit. However, in the new GST regime, supply of goods by one person to another without consideration does not enjoy this benefit.
“This would lead to increased cost of promotion and also pose a challenge as regards the valuation to be adopted for calculating GST on such goods,” Gandhi said.
Pointing out that such taxation practices will hamper the business strategy of companies engaged in wide range of manufacturing activities, the AITAF Chief urged the Finance Minister to prevail upon the GST Council to make necessary changes in GST rules to enable such transactions like free samples and gifts offered with purchases as well as popular “buy-one-get-one-free” deals to avail benefits of input tax credit. End/