GST & Accounting Treatment Guide
Dealer and Sub-Dealer Scenarios
Scenario 1: Gift of Computer to Sub-Dealer
Facts of the Case
- Client (Dealer A) is a registered person under GST
- Gives a computer as a gift to sub-dealer (Dealer B)
- No consideration involved (free of cost)
GST Treatment
| Aspect | Treatment |
|---|---|
| Taxability | Taxable supply under Schedule I of CGST Act, 2017 - Supply without consideration |
| GST Liability | Yes, GST is payable by Dealer A |
| Valuation | Open Market Value or Cost + 10% margin (whichever is higher) |
| Input Tax Credit (ITC) | ITC available on purchase of computer as it is used for business purposes |
| Invoice Type | Tax Invoice as per Section 31 of CGST Act |
Example Calculation
| Cost of Computer | ₹50,000 |
| Add: 10% Margin | ₹5,000 |
| Taxable Value | ₹55,000 |
| CGST @ 9% | ₹4,950 |
| SGST @ 9% | ₹4,950 |
| Total GST Payable | ₹9,900 |
Accounting Treatment in Books of Dealer A
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| At the time of Purchase of Computer: | ||
| Computer A/c | 50,000 | |
| GST Input A/c (CGST + SGST) | 9,000 | |
| To Supplier A/c | 59,000 | |
| (Being computer purchased) | ||
| At the time of Gift to Sub-Dealer: | ||
| Business Promotion Expenses A/c | 55,000 | |
| GST Output A/c (CGST + SGST) | 9,900 | |
| To Computer A/c | 50,000 | |
| To Sales A/c (Deemed Supply) | 5,000 | |
| To GST Payable A/c | 9,900 | |
| (Being computer gifted to sub-dealer as deemed supply) | ||
Scenario 2: Dealer/Sub-Dealer Meeting Expenses
Facts of the Case
- Client organizes dealer/sub-dealer meeting at hotel or restaurant
- Expenses include: Hotel hall booking, Food & beverages, Lodging, Event management
GST Treatment - Input Tax Credit (ITC) Analysis
| Expense Type | ITC Availability | Legal Provision |
|---|---|---|
| Hotel Hall Booking Charges | ITC Available | Business promotion expense - No restriction |
| Food & Beverages | ITC Blocked | Section 17(5)(b) of CGST Act - Unless obligatory for employer |
| Lodging/Accommodation | ITC Available | Business purpose - No restriction |
| Event Management Charges | ITC Available | Business promotion expense - No restriction |
Example Calculation
| Expense Head | Amount (₹) | GST @ 18% (₹) | Total (₹) | ITC Claim |
|---|---|---|---|---|
| Hotel Hall Booking | 30,000 | 5,400 | 35,400 | ₹5,400 |
| Food & Beverages | 25,000 | 4,500 | 29,500 | NIL |
| Lodging | 20,000 | 3,600 | 23,600 | ₹3,600 |
| Event Management | 15,000 | 2,700 | 17,700 | ₹2,700 |
| Total | 90,000 | 16,200 | 1,06,200 | ₹11,700 |
Note: ITC on Food & Beverages (₹4,500) is blocked and will be added to expenses.
Accounting Treatment
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Business Promotion Expenses A/c (Hall + Lodging + Event Mgmt) | 65,000 | |
| Food & Beverage Expenses A/c (Including blocked GST) | 29,500 | |
| GST Input A/c (Eligible ITC) | 11,700 | |
| To Hotel/Vendor A/c | 1,06,200 | |
| (Being dealer meeting expenses recorded, ITC claimed only on eligible items) | ||
Key Accounting Points:
- Food & beverages cost includes GST (₹25,000 + ₹4,500 = ₹29,500) as ITC is blocked
- Eligible ITC of ₹11,700 is claimed on hall, lodging, and event management
- Expenses are classified under business promotion/marketing expenses
Scenario 3: Business Training or Seminar
Facts of the Case
- Client organizes business training or seminar (not dealer meet)
- Training for employees/dealers on business operations
- Expenses include: Training fees, Hall booking, Material costs, Food (if any)
GST Treatment - Training & Seminar Expenses
| Expense Type | ITC Availability | Legal Provision |
|---|---|---|
| Training/Seminar Fees | ITC Available | Used for business purposes - No restriction |
| Training Hall Booking | ITC Available | Business purpose - No restriction |
| Training Materials/Stationery | ITC Available | Used for business purposes - No restriction |
| Food & Beverages during Training | ITC Blocked | Section 17(5)(b) - Unless obligatory for employer |
| Trainer's Travel & Accommodation | ITC Available | Business purpose - No restriction |
Example Calculation
| Expense Head | Amount (₹) | GST @ 18% (₹) | Total (₹) | ITC Claim |
|---|---|---|---|---|
| Training Fees | 50,000 | 9,000 | 59,000 | ₹9,000 |
| Training Hall | 20,000 | 3,600 | 23,600 | ₹3,600 |
| Training Materials | 10,000 | 1,800 | 11,800 | ₹1,800 |
| Food & Refreshments | 15,000 | 2,700 | 17,700 | NIL |
| Trainer Accommodation | 12,000 | 2,160 | 14,160 | ₹2,160 |
| Total | 1,07,000 | 19,260 | 1,26,260 | ₹16,560 |
Note: ITC on Food & Refreshments (₹2,700) is blocked under Section 17(5)(b).
Accounting Treatment
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Training & Development Expenses A/c | 92,000 | |
| Food & Refreshment Expenses A/c (Including blocked GST) | 17,700 | |
| GST Input A/c (Eligible ITC) | 16,560 | |
| To Vendor/Service Provider A/c | 1,26,260 | |
| (Being training expenses recorded with eligible ITC claimed) | ||
Key Accounting Points:
- Training expenses (₹50,000 + ₹20,000 + ₹10,000 + ₹12,000 = ₹92,000) are capitalized or expensed based on accounting policy
- Food costs include GST as ITC is blocked (₹15,000 + ₹2,700 = ₹17,700)
- Eligible ITC of ₹16,560 claimed on training fees, hall, materials, and accommodation
- Training expenses improve employee/dealer capabilities and are legitimate business expenses
Important GST Provisions - Summary
Section 17(5)(b) - CGST Act
ITC shall not be available on food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, EXCEPT where an employer is obliged to provide the same to its employees under any law for the time being in force.
Schedule I - CGST Act
Supply of goods or services without consideration is treated as supply in cases like:
- Disposal of goods forming part of business assets as gifts
- Supply between related persons in course of business
Valuation Rules
For supplies without consideration or between related parties, value shall be:
- Open Market Value, or
- Cost + 10% margin
- (Whichever is higher)