Last updated 16 September 2026. This is a practical guide for HR, admin and procurement teams, written by a corporate gifting supplier that issues these invoices every week. It is general information, not tax advice; the section references are given so that your chartered accountant can confirm the treatment for your company.
The short answer
A GST invoice is issued on every corporate gift order, but the GST on gifts is usually a cost, not a credit: Section 17(5)(h) of the CGST Act blocks input tax credit on goods disposed of by way of gift. Gifts to an employee up to ₹50,000 in a financial year are not treated as a supply. For the employee, gifts from the employer above an aggregate of ₹5,000 a year are a taxable perquisite. A hamper is a mixed supply, taxed at the highest rate among its contents — which, since the 22 September 2025 rate rationalisation, means most food-and-décor hampers sit at 5% and any hamper with an 18% item is taxed at 18% in full.
1. Can a company claim input tax credit on corporate gifts?
Because credit is blocked, the tax on the invoice is part of the per-head cost.
Generally, no. Section 17(5)(h) of the CGST Act, 2017 lists goods "lost, stolen, destroyed, written off or disposed of by way of gift or free samples" among the blocked credits. If your company buys hampers or branded items and gives them away without charging the recipient — employees, clients, dealers, partners — the input tax on that purchase cannot be set off against your output GST, even though the purchase is plainly in the course of business.
The CBIC's Circular 92/11/2019-GST of 7 March 2019 applied the same logic to promotional schemes: free samples and gifts carry no ITC, while genuine "buy one get one" offers and trade discounts are treated differently because there is a supply with consideration. The dividing line is consideration. A branded bottle handed to a delegate for free is a gift; the same bottle sold to a distributor at a reduced price is not.
What this means for the budget: treat the GST on the invoice as part of the landed cost of the programme. A ₹1,000-per-head gift at 18% is a ₹1,180-per-head cost, not ₹1,000 with ₹180 coming back.
2. Gifts to employees: the ₹50,000 rule
Schedule I of the CGST Act treats a supply between related persons — and an employer and employee are related persons — as a supply even without consideration, except that gifts from an employer to an employee not exceeding ₹50,000 in value in a financial year are not treated as a supply. The government's press release of 10 July 2017 confirmed the reading: gifts up to ₹50,000 per employee per year attract no output GST.
Two practical consequences:
- Below ₹50,000 a year per employee — the normal case for Diwali hampers, onboarding kits and work-anniversary gifts — the company pays no output GST on the gift, and the ITC on the purchase is blocked under 17(5)(h) as above.
- Above ₹50,000 a year per employee — a car, a long-service award of real value, a founder's gift to a leadership team — the gift becomes a supply on which output GST is payable on its value. Professional views differ on whether ITC then opens up; this is exactly the point at which to involve your CA before the gift is made, not after.
Note the word aggregate: three gifts of ₹20,000 to the same person in one financial year cross the line together.
3. Income tax for the employee: the ₹5,000 perquisite limit
Under Rule 3(7)(iv) of the Income-tax Rules, the value of any gift, voucher or token received by an employee from the employer is exempt where the aggregate value in a financial year does not exceed ₹5,000. Above that, the value is taxable as a perquisite in the employee's hands and goes through payroll. The rule is commonly read as the whole value becoming taxable once the ₹5,000 aggregate is crossed, not only the excess — another point for your payroll team to confirm.
This is why most per-head corporate gifting budgets in India sit under ₹5,000, and why a company that gives a ₹1,500 Diwali hamper, a ₹2,000 anniversary gift and a ₹2,500 year-end gift to the same employee may have created a payroll entry without meaning to. Plan the year's gifting per head, not per occasion.
4. Deductibility for the company, and Section 194R
Corporate gifts given for business purposes — festive gifts to clients, employee appreciation, dealer incentives — are ordinarily deductible as business expenditure under Section 37(1) of the Income-tax Act, provided they are not personal, not capital in nature and not prohibited by law. Keep the invoice and a recipient list; that is the documentation an assessing officer asks for. Cash payments above ₹10,000 for such purchases are disallowed under Section 40A(3), which is one more reason corporate gifting runs on invoices and bank transfers.
Section 194R, in force since 1 July 2022, requires a person providing a benefit or perquisite arising from business or profession to a resident to deduct tax at 10% where the aggregate value to that recipient exceeds ₹20,000 in a financial year. It is aimed at benefits to business associates — dealers, distributors, channel partners, consultants — rather than to your own employees, whose gifts are handled as perquisites under salary. Whether a particular festive gift to a partner falls inside 194R depends on the facts, and the CBDT's circulars on the section run to many pages; if your dealer gifting exceeds ₹20,000 per recipient in a year, put the question to your CA before dispatch.
5. What GST rate applies to a gift hamper?
Mixed supply: the whole price is taxed at the highest rate among the contents (s.8(b) CGST).
A hamper — dry fruits, chocolates, a candle, a diya, a mug, packed and sold at one price — is a mixed supply under Section 8(b) of the CGST Act: two or more individual supplies bundled for a single price that are not naturally bundled. A mixed supply is taxed as a supply of the item that attracts the highest rate among its contents, on the whole price.
The 22 September 2025 rate rationalisation replaced the four-slab structure with two main slabs, 5% and 18%, and moved a long list of gift-hamper staples — chocolates, nuts and dry fruits, candles, most bakery items — to 5%. The practical effect for corporate gifting:
- A hamper of dry fruits, chocolates, a candle and a diya can sit at 5% on the whole price.
- Add one 18% item — a steel bottle, an electronic gadget, a leather accessory — and the entire hamper is taxed at 18%.
- Where the 18% item is wanted, it is often cheaper to have it invoiced as a separate line at its own price, so the hamper stays at 5% and the bottle at 18%. Whether a given bundle is a mixed supply or separately priced items is a question of how it is sold and invoiced, so agree it with the supplier and your CA up front.
This is why the HSN code per line on the invoice matters: it is the record of what rate was applied to what, and the first thing an auditor reads.
6. What a compliant corporate gifting invoice must show
- Supplier's GSTIN and your company's GSTIN — the buyer is the company, not the employee who placed the order.
- Invoice number, date, and place of supply. When gifts are billed to your head office and delivered to employees in several states, the place of supply follows the bill-to party under Section 10(1)(b) of the IGST Act; your CA will confirm whether IGST or CGST+SGST applies.
- Line items with HSN codes, quantity, taxable value, rate and tax amount per line — a hamper as a single mixed-supply line, or its contents as separate lines if sold separately.
- The total in words and figures, and the supplier's signature or digital signature.
- Attached: the recipient or address list for multi-address programmes, which doubles as your Section 37(1) documentation and, where relevant, your 194R record.
Every corporate order from The Happiness Story ships with one GST invoice in this form covering all units and all delivery addresses; the seven facts a buyer needs — MOQ, branding, lead time, samples, payment, GST treatment and delivery — are stated on every corporate gifts page.
A checklist for HR and procurement
- Budget the GST as cost; assume no input credit on gifts.
- Plan gifting per employee per year: stay under ₹5,000 aggregate for a tax-free perquisite, and under ₹50,000 to avoid a GST supply.
- For dealers and partners, track the aggregate per recipient against the ₹20,000 Section 194R threshold.
- Ask the supplier which rate the hamper carries and why; keep 18% items out of a 5% hamper unless invoiced separately.
- Get the invoice in the company's name with GSTIN and HSN per line, and keep the recipient list with it.
- Pay by bank transfer; never in cash above ₹10,000.
Frequently asked questions
Is GST applicable on Diwali gifts to employees?
Not as output GST, provided the gifts to that employee stay within ₹50,000 in the financial year. The GST charged by the supplier on the purchase is a cost to the company because input tax credit on gifts is blocked under Section 17(5)(h).
Are Diwali gifts to clients tax deductible?
Ordinarily yes, as business expenditure under Section 37(1), with the invoice and a recipient list as documentation. Where the aggregate benefit to one business recipient exceeds ₹20,000 in a year, check Section 194R with your CA.
What is the GST rate on a corporate gift hamper?
The highest rate among its contents, applied to the whole price, because a hamper is a mixed supply. After 22 September 2025 most food-and-décor hampers fall at 5%; a hamper containing any 18% item is taxed at 18% unless that item is sold and invoiced separately.
Can I claim ITC on promotional items given to distributors?
Not where they are given free — Circular 92/11/2019-GST treats free gifts and samples as blocked under 17(5)(h). Items supplied for a price, or as part of a contractual scheme with consideration, are treated differently; the facts decide, so document the scheme.
Do I need the employee's PAN or GSTIN for a corporate gift?
No. The invoice is to the company. The employee's PAN matters only on the payroll side if the year's gifts to that person cross the ₹5,000 perquisite limit.
Section references: CGST Act 2017 — s.8(b) mixed supply, s.17(5)(h) blocked credits, Schedule I (employer–employee gifts); IGST Act s.10(1)(b); CBIC Circular 92/11/2019-GST; Income-tax Act s.37(1), s.40A(3), s.194R; Income-tax Rules r.3(7)(iv). Rates as notified for 22 September 2025. This guide is reviewed each quarter. For a corporate programme with the invoice done right, send headcount, per-head budget and delivery date through the corporate enquiry form.