Input Tax Credit not allowed on stock variation and promotional items – High Court

The Madras High Court ruled in the case of ARS Steel and Alloy International that Input Tax Credit (ITC) is not allowed for stock variations identified during inspections, nor for gold coins and t-shirts distributed as promotional items.
The court upheld the Department’s decision to reject ITC on promotional goods, citing Section 17(5)(h) of the CGST Act, which explicitly denies ITC on items distributed as gifts, and found that the petitioner did not sufficiently demonstrate eligibility for ITC concerning stock discrepancies.
This decision highlights the importance of maintaining accurate stock records and conducting regular audits, as well as the necessity for taxpayers to be cautious about the classification of promotional items to avoid ITC denial under GST regulations.