GST and Tax on Corporate Gifts in India: What Buyers Should Know

What's on the invoice

Zyftt charges GST at the rate that applies to each product; rates differ by category and the invoice shows the rate applied to each line. The invoice carries the GSTIN of Pramara Promotions Ltd. and your company's GSTIN. Prices on the site already include GST, and one order produces one invoice.

Can you claim input tax credit on gifts?

Usually not. Section 17(5)(h) of the CGST Act blocks input tax credit on goods "disposed of by way of gift or free samples", and CBIC's Circular No. 92/11/2019-GST (7 March 2019) reiterates that no credit is available on goods given away free. In practice, the GST paid on Diwali hampers for clients or employees is a cost, not a credit.

There are situations where the treatment differs: goods supplied under a contractual obligation, promotional schemes where the item is part of a sale ("buy one, get one"), and items that are not gifts at all — uniforms, safety gear, tools of the job. Your chartered accountant decides which side of the line a purchase falls on; the invoice from us supports either treatment.

The ₹50,000 employee-gift rule

Under Schedule I of the CGST Act, gifts from an employer to an employee of up to ₹50,000 in value in a financial year are not treated as a supply, so no GST is payable by the employer on giving them. Above ₹50,000 per employee per year, the excess is a deemed supply and GST becomes payable on it. For typical Diwali gifts of ₹500–5,000 this threshold never comes into play.

Income tax: for the company and for the recipient

• For the company: gifts to clients and business associates are normally deductible as business-promotion expenditure under Section 37(1), provided they are reasonable and documented. Keep the invoice and the recipient list together.
• For employees: gifts, vouchers or tokens up to ₹5,000 in aggregate per financial year are exempt as a perquisite (Income-tax Rules, Rule 3(7)(iv)). Above that, the value becomes a taxable perquisite in the employee's hands and shows up in their payroll.
• For other recipients: gifts totalling more than ₹50,000 in a year received without consideration can be taxable income for the recipient under Section 56(2)(x). Rarely relevant for corporate gifting, but worth knowing for high-value gifts.

Gift policies and anti-bribery rules

Not a tax question, but it lands on the same desk. Many companies cap the value of gifts their staff may accept — ₹1,000 to ₹5,000 is common, and some banks and multinationals set it at zero. Government and public-sector officials are bound by conduct rules with low thresholds and reporting requirements. Keep client gifts modest, send them to the office rather than the home, and keep the invoice as the paper trail.

Practical checklist

• Give your GSTIN at checkout or with the enquiry so it prints on the invoice.
• One purchase order, one invoice — simpler for both audit and finance.
• Keep the recipient list with the invoice for employee and client gifts.
• Stay under ₹5,000 per employee per year if you want the gift to remain perquisite-tax-free.
• Budget GST as a cost, not a credit, unless your CA confirms otherwise.