POS Materials explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Every FMCG company spends heavily on what sits in the retailer's shop — coolers, racks, standees, danglers, wobblers, shelf strips. Four superficially similar spends produce four different GST outcomes, and the variable is not the object but whether ownership passes and whether the item was ever the company's asset.
Where the FMCG company retains ownership of a visi cooler or display rack and grants only a right to use, the asset stays on its books and ITC is eligible. Where the asset is permanently transferred to a retailer, it is a deemed supply under Entry 1 of Schedule I — credit is preserved, and output GST is payable on open market value, with no section 17(5)(h) reversal. Promotional merchandise given outright is a gift — ITC blocked. Branded standees and danglers are contested, and turn on the facts.
The Guide's four-way matrix
| POS material | Nature | ITC treatment |
|---|---|---|
| Returnable branded display rack / visi cooler | "Company's own asset; ownership not transferred" | ITC eligible |
| Branded standees, danglers (non-returnable) | "Contested — advertising material vs. gift; fact-dependent" | "ITC eligible if genuinely incidental to sales promotion; blocked under 17(5)(h) only if treated as outright gift on facts" |
| Branded refrigerators given permanently to retailers | "Permanent transfer of business asset (ITC availed) — deemed supply under Schedule I para 1 / s.7(1)(c)" | "ITC available; GST payable as output tax on OMV — no 17(5)(h) reversal" |
| Promotional merchandise (T-shirts, caps) given to trade | "Outright gift, no consideration, no Schedule I coverage" | "ITC blocked under Section 17(5)(h)" |
Row one: the returnable asset
Nothing leaves the company. The cooler is capitalised in the FMCG company's books, placed in the retailer's shop, and returned when the arrangement ends.
And where a right to use is granted for consideration, Schedule II characterises it. "FMCG companies frequently provide branded refrigerators, coolers, display racks, vending machines, and dispensers to retailers. Where ownership remains with the FMCG company and only the right to use is granted against the consideration, such transaction is treated as supply of service under Schedule II."
Two consequences follow. The company charges GST on the rental as a service, and it keeps the credit on the asset because the asset is used in making that taxable outward supply.
Where no consideration is charged, the asset is simply company property deployed for sales promotion — credit eligible under section 16(1), no output supply, nothing to reverse.
The documentation that supports it is an asset register entry, a placement agreement recording that title does not pass, and a retrieval process that actually operates. An asset "returnable" on paper but never returned invites the argument that it was transferred in substance.
Row three: the deemed supply, and why it is the better outcome
This is the row that surprises people, because it produces output tax — and is nonetheless usually the preferable position.
Entry 1 of Schedule I treats as supply the "permanent transfer or disposal of business assets where input tax credit has been availed on such assets." A refrigerator on which credit was taken and which is then handed over for good is squarely within it.
And the Guide draws out the credit consequence explicitly:
"Since the transaction itself is treated as a taxable supply under Section 7(1)(c) read with Schedule I, the asset continues to be used for making a taxable outward supply. Therefore, Section 17(5)(h) has no application in such cases, and there is no requirement to reverse the ITC originally availed on the asset. Instead, the supplier is required to discharge GST on the value determined in accordance with Section 15 read with Rules 27 to 31."
Compare the arithmetic. On a ₹30,000 cooler at 18%: as a deemed supply, credit of ₹5,400 is kept and output tax is paid on open market value at the time of transfer — a depreciated figure, so materially less than ₹5,400. As a gift under 17(5)(h), the full ₹5,400 is lost and nothing is recovered.
The deemed-supply route is therefore cheaper, provided the asset was capitalised and credit was actually availed — which is exactly the precondition Entry 1 states. Schedule I and the deemed supply →
Row four: why merchandise is different
A branded T-shirt or cap was never a business asset on which ITC was availed as an asset — it was bought to give away. There is no consideration, and no Schedule I entry covers it. So section 17(5)(h) applies in terms: goods "disposed of by way of gift".
The distinction from row three is the character of the item, not its value. A refrigerator is capital equipment deployed in the business and later transferred; a cap is promotional stock acquired for distribution. The first has a credit standing against it that Entry 1 preserves; the second never had one that survives 17(5)(h). Free samples and gifts →
Row two: the contested middle
Standees, danglers, wobblers and shelf strips are the genuinely uncertain category, and the Guide says so — "Contested — advertising material vs. gift; fact-dependent".
The two characterisations:
Advertising material. The item bears the brand, has no independent utility to the retailer, is not something the retailer would ever buy, and exists solely to make the company's product visible. On that view it is the company's own advertising spend consumed in its own business — credit eligible under section 16(1), no disposal at all.
A gift. The item is handed over, never returned, and becomes the retailer's. On that view it is disposed of by way of gift, and 17(5)(h) blocks the credit.
The Guide's formulation leans to the first — "ITC eligible if genuinely incidental to sales promotion; blocked… only if treated as outright gift on facts" — which puts the default on the advertising side and makes the gift characterisation the exception requiring facts.
What supports the advertising characterisation: the material carries only the company's branding, has no resale or independent use, is specific to a campaign, is expensed as advertising rather than as trade spend, and is removed or replaced at campaign end.
What undermines it: items of general utility to the retailer (a plain rack, a chair, a clock), items with retailer branding, and items with a realisable second-hand value.
Advertising and platform charges, briefly
The same section 16(1) reasoning covers digital spend. "sponsored listings, banner advertisements, product ranking fees, platform promotion charges" are "generally incurred for increasing sales and market visibility and therefore ordinarily qualifies for ITC."
With one routing point: "Where the benefit accrues to multiple States, credit should be distributed through the ISD mechanism in accordance with Section 20 and Rule 39." ISD mandatory since 1 April 2025 →
Key takeaways
- Returnable coolers and racks — ownership retained, ITC eligible; a right to use for consideration is a supply of service under Schedule II.
- Permanently transferred refrigerators — deemed supply under Entry 1 of Schedule I; credit kept, output GST on OMV, no 17(5)(h) reversal.
- The deemed-supply route is usually cheaper than a 17(5)(h) block, because output tax is computed on depreciated value.
- Promotional merchandise (T-shirts, caps) — outright gift, no Schedule I coverage, ITC blocked.
- Standees and danglers are fact-dependent, with the default on the advertising side.
- Support the advertising view with company-only branding, no independent utility, campaign specificity and advertising accounting treatment.
- Platform advertising and sponsored listings are ordinarily creditable, distributed via ISD where multiple States benefit.
Read next
- Free Samples and Gifts: Section 17(5)(h) Against Schedule I Entry 1
- Schedule I Entry 2: Stock Transfers in the FMCG Supply Chain
- TCS Under Section 52 and the Cash Ledger Refund for FMCG Sellers
Disclaimer: Positions stated as on 5 September 2026, based on sections 7, 15, 16(1), 17(5)(h) and 20 of the CGST Act, 2017, Schedules I and II thereto, and rules 27 to 31 and 39 of the CGST Rules, 2017, as reproduced in the ICAI GST Sectoral Guide on Fast-Moving Consumer Goods (July 2026).