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

What's on the invoice

Zyftt charges GST at the rate for each product, and the invoice shows the rate on each line. It carries the GSTIN of Pramara Promotions Ltd. and your company's GSTIN. Most prices on the site include GST; products marked "+ 18% GST" and the Diwali collection are priced before GST. 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". CBIC Circular No. 92/11/2019-GST (7 March 2019) confirms that no credit is available on goods given away free. The GST paid on Diwali gifts for clients or employees is a cost, not a credit.

Some cases differ: goods supplied under a contract, promotional schemes where the item is part of a sale ("buy one, get one"), and items that are not gifts at all, such as uniforms, safety gear and work tools. Your chartered accountant decides which side a purchase falls on; our invoice supports either treatment.

The ₹50,000 employee-gift rule

Under Schedule I of the CGST Act, gifts from an employer to an employee worth up to ₹50,000 in a financial year are not a supply, so the employer pays no GST on giving them. Above ₹50,000 per employee per year, the excess is a deemed supply and GST is payable on it. Diwali gifts of ₹500–5,000 do not reach this limit.

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), if they are reasonable and documented. Keep the invoice and the recipient list together.
• For employees: gifts, vouchers or tokens up to ₹5,000 in total per financial year are exempt as a perquisite (Income-tax Rules, Rule 3(7)(iv)). Above that, the value is a taxable perquisite and shows up in the employee's payroll.
• For other recipients: gifts worth more than ₹50,000 in a year, received without payment, can be taxable income under Section 56(2)(x). Rarely relevant for corporate gifts, but it applies to high-value ones.

Gift policies and anti-bribery rules

Many companies cap the value of gifts their staff may accept, and some allow none. Government and public-sector officials have conduct rules with low limits and reporting duties. Keep client gifts modest, send them to the office, and keep the invoice.

Practical checklist

• Give your GSTIN at checkout or with the enquiry so it prints on the invoice.
• One purchase order, one invoice: simpler for audit and finance.
• Keep the recipient list with the invoice.
• Stay under ₹5,000 per employee per year to keep the gift free of perquisite tax.
• Budget GST as a cost, not a credit, unless your CA says otherwise.