GST and Input Tax Credit on Corporate Gifts in India
What Section 17(5) actually says about input tax credit on gifts, where the ₹50,000 employee threshold applies, and what your invoice must show.
This is the question finance teams ask before they approve a corporate gifting budget, and it is answered badly almost everywhere. Here is the structure of the rules. It is general information, not tax advice, and your accountant has the final say on your facts.
The starting point: Section 17(5)(h)
Section 17(5)(h) of the CGST Act blocks input tax credit on goods that are lost, stolen, destroyed, written off, or disposed of by way of gift or free samples. So the default position for a pure goodwill gift is that ITC is not available on the GST paid when buying it.
Where the position changes
Gifts to employees under a contractual obligation
Schedule III treats services by an employee to the employer as neither a supply of goods nor services. Where a benefit is provided under the terms of the employment contract, the transaction sits differently from a discretionary gift. This is the distinction that decides many cases, and it turns on your documentation.
The ₹50,000 threshold
Gifts by an employer to an employee not exceeding ₹50,000 in value in a financial year are not treated as a supply. This is a threshold about whether outward GST is payable on the gift, not a blanket permission to claim input credit. The two questions are separate and are often conflated.
Items that are not gifts at all
Branded merchandise given to distributors under a documented sales-promotion scheme, or equipment issued to staff to do their job, is not the same as a gift. If a laptop bag or a headset is issued as a work tool and recorded as such, that is a business input, not a giveaway.
What your invoice must show
Whatever the credit position, the purchase invoice needs to be compliant: supplier GSTIN, your GSTIN, HSN codes, taxable value, and the CGST/SGST or IGST split. Nalanda Enterprises issues this on every order, including bulk gifting orders. Without a compliant invoice there is no credit to argue about in the first place.
The practical approach
Decide the characterisation before you buy, not after. If the intent is a goodwill gift, budget on the GST-inclusive cost and do not plan around credit. If the items are being issued under contract or as work equipment, document that at the point of purchase. Retrofitting a justification at audit time is where companies come unstuck.
For a compliant GST invoice on bulk electronics, contact Nalanda Enterprises at info@nalandaenterprises.com or +91 91155 13366, or see the corporate gifting page.