In Mumbai, government and indirect taxes department have been dragged by a group of companies to court over denying input tax credit on gifts and samples given to customers and clients. The Gujarat High Court has issued notices to the to the government and tax department on the companies’ petition challenging the denial. Abhishek A Rastogi, partner at Khaitan & Co, who is arguing for the companies in the court said that “The restriction of input tax credit on goods written off or disposed of by way of gift or free samples is against the main objective of GST that there should not be any tax cascading and hence such a restriction will have to cross the bridge of constitutional validity.” Many pharma and FMCG Companies were under the taxman’s lens for dishing out freebies to consumers as tax authorities wanted payment of GST or reverse of input tax credit on extra quantities. However, this was solved later on that doesn’t apply to input tax credit for the free samples and gifts, tax experts said.
