📌 1. Introduction

The Goods and Services Tax (GST) regime in India has fundamentally transformed how businesses handle taxation on transactions, services, and promotional expenses. Among the grey areas is the treatment of co-branded marketing campaigns, where two or more entities collaborate to promote products/services jointly.

This guide explores how businesses can rightfully claim GST Input Tax Credit (ITC) on such marketing spends, ensuring compliance and minimizing tax liabilities.

🎯 2. Understanding Co-Branded Marketing

Co-branded marketing involves joint promotional activities by two or more entities. For example:

• A smartphone brand ties up with a telecom operator to offer bundled services.

• A bank offers discounts on a specific e-commerce portal using co-branded credit cards.

• A retail brand promotes a payment app for cashback on purchases.

In all the above, both brands share costs, and the promotional material bears both logos or identities.

📜 3. GST Provisions Relevant to Marketing

🔹 Section 16 of the CGST Act, 2017:

Allows a registered person to claim ITC on goods/services used in the course or furtherance of business.

🔹 Section 17(5):

Denies ITC on certain expenses like gifts, personal use items, or free promotional giveaways unless business use is clearly established.

🔹 Rule 42 and 43:

Prescribe input tax apportionment rules when input is used for both taxable and non-taxable supplies.

🧾 4. Eligibility for Input Tax Credit (ITC)

✅ Conditions to Claim ITC:

1. You must be a registered person under GST.

2. The invoice must be tax paid and issued by a registered supplier.

3. Goods/services must be received and used in the course of business.

4. The supplier must have filed GSTR-1 and the credit must reflect in GSTR-2B.

5. Payment to supplier must be made within 180 days.

❌ Ineligible if:

• Used for personal consumption.

• Gifts given without taxable consideration.

• Supplier has defaulted in GST return filings.

📂 5. Documentation Requirements

Proper documentation is critical. Below are must-haves:

⚖️ 6. Valuation Rules for Shared Branding

In co-branded campaigns, each party bears part of the marketing cost. The valuation must clearly distinguish:

• Who is the primary beneficiary?

• Is it a principal-agent relationship?

• Was any consideration received for inclusion of branding?

Case Example:

If Company A pays for a billboard featuring Company B’s logo, and B reimburses part of the cost, A must raise a tax invoice on B for their share.

If no reimbursement, A can claim full ITC, provided usage is business-related.

📊 7. Allocation of Input Credit

Scenario A: Equal Cost Sharing

• Each party claims ITC based on their share.

• Invoices should be split or cross-invoiced accordingly.

Scenario B: One Party Bears Entire Cost

• That party can claim full ITC if benefit is business-oriented and no personal use exists.

• If benefit extends to the other party, they must reimburse to make it compliant.

Pro Tip:

Always reconcile campaign budgets with tax invoices and ITC claimed in GSTR-3B.

⚠️ 8. Common Mistakes and Pitfalls

• Claiming ITC without valid GST invoice.

• No documentation proving campaign is co-branded.

• ITC claimed by both parties on full invoice value.

• Not reversing ITC on non-payment within 180 days.

• Co-branding with unregistered vendors.

🧑‍⚖️ 9. Case Law & Advance Rulings

📌 Colgate-Palmolive India Ltd. (GST AAR Maharashtra)

Colgate offered freebies with its products. ITC was denied on marketing expenses as the items were given away free.

📌 M/s Biostadt India Ltd. (GST AAR Maharashtra)

Ruled that ITC on sales promotion used to increase taxable supplies is eligible.

These rulings show that business intent and proof of taxable output are critical for ITC eligibility.

🏆 10. Best Practices to Maximize ITC

✔️ Always draft a written agreement with brand partners.
✔️ Use registered vendors for promotional work.
✔️ Maintain a proper audit trail.
✔️ Claim proportionate ITC only.
✔️ Align ITC claim with GSTR-2B matching.
✔️ If cost is reimbursed, raise tax invoices.
✔️ Avoid using promotional materials for personal or employee gifting.

🧩 11. Conclusion

Co-branded marketing can be an effective strategy to grow your brand, but it must be backed with proper GST compliance.

Claiming GST Input on such campaigns requires clear documentation, valid GST invoices, defined cost-sharing terms, and accurate tax treatment.

Businesses must train their accounting teams and consult with GST experts to avoid reversals, penalties, or notices.