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The Promotional Products/Materials & Marketing items used in promoting their brand & marketing their products can be considered as “inputs” as defined in Section 2(59) of the CGST Act, 2017. However, the GST paid on the same cannot be availed as input tax credit in view of the provisions of Section 17(2) and Section 17(5)(h) of the CGST Act, 2017.

Input tax credit- Section 16 of CGST Act- In the instant case, the appellant is a manufacturer of knitted and woven garments under the brand name “JOCKEY” and swim wear and swimming equipment under the brand name “SPEEDO”. The Appellant had applied for a ruling on whether the promotional goods purchased for use in their showrooms for displaying their products and the items distributed to their showrooms, distributors and retailers for giving away to customers, can be treated as 'inputs' on which input tax credit can be availed. The lower Authority held that the items which are sent to the showrooms for use in the display of the Appellant's products without transferring the ownership, are to be treated as capital goods and not inputs; that the GST paid on the procurement of such items is eligible for input tax credit. However, when these items reach the end of their period of usage, they are either disposed of or written off by the Appellant and hence the input tax credit which was claimed is required to be reversed as per Rule 43 of the CGST Rules, 2017. In terms of Section 17(2) of the CGST Act, where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the IGST Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. In other words, Section 17(2) provides that input tax credit shall be allowed only when the goods and services or both are used for business purposes or for making a taxable supply (including zero-rated supply). When the goods or services or both are used towards making an exempt supply, then input tax credit is not allowed. As per Section 2(47) of the CGST Act, the term 'exempt supply' also includes non-taxable supply. In view of the above provisions, we hold that the GST paid on the procurement of promotional items supplied to the EBOs/franchisees and distributors free of charge will not be eligible for input tax credit since the said supply is a non-taxable supply. Held that- We set aside the ruling No. KAR ADRG 54/2020 dated 15/12/2020 passed by the Advance Ruling Authority and answer the question of the Appellant as follows: The Promotional Products/Materials & Marketing items used by the Appellant in promoting their brand & marketing their products can be considered as “inputs” as defined in Section 2(59) of the CGST Act, 2017. However, the GST paid on the same cannot be availed as input tax credit in view of the provisions of Section 17(2) and Section 17(5)(h) of the CGST Act, 2017.
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