BMW India's Event Goods Not Eligible for Tax Credit Under GST Law

The ruling confirmed that the goods procured and supplied by BMW India during promotion/marketing events qualify as being used in the course or furtherance of business under the CGST/HGST Act, 2017. However, the company is ineligible to avail input tax credit for these goods due to the restriction under Section 17(5)(h) of the CGST Act, which prohibits credit for goods disposed of as gifts.

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Issues Involved:
1. Whether the goods supplied during promotion/marketing events qualify as being used in the course or furtherance of business.
2. Whether the company is eligible to avail input tax credit for such goods supplied under the marketing events.

Issue-Wise Detailed Analysis:

1. Qualification of Goods as Used in the Course or Furtherance of Business:
The applicant, BMW India Private Limited, organizes various marketing and sales promotion events to enhance brand loyalty and attract potential customers. These events include the distribution of BMW-branded lifestyle accessories such as duffle bags, golf balls, t-shirts, caps, diaries, keychains, and passport holders on a free-of-cost (FOC) basis. The company records the expenditure for these events as sales promotion and marketing expenses.

The applicant argued that these supplies qualify as being used in the course or furtherance of business as defined under Section 2(17) of the Central Goods and Services Tax Act, 2017 (CGST Act). They cited that "business" includes any activity undertaken with the intent and purpose of value addition to one's business, which encompasses marketing, advertisement, and sales promotions.

The ruling confirmed that the goods procured and supplied during these events do qualify as being used in the course or furtherance of business, aligning with the definitions and provisions under the CGST Act.

2. Eligibility to Avail Input Tax Credit:
The applicant sought clarity on whether they could avail input tax credit for the goods supplied during these promotional events. Section 16 of the CGST Act provides for the credit of input tax paid on any supply of goods or services used in the course or furtherance of business. However, Section 17(5) of the CGST Act lists supplies for which input tax credit is not allowed, including goods disposed of by way of gift or free samples.

The applicant contended that the distributed items do not fall under the category of gifts, drawing a distinction between gifts and FOC supplies. They argued that gifts are voluntary, occasional, and made without consideration, whereas FOC supplies are made with an intention to receive consideration in kind, such as increased brand loyalty and potential sales.

Despite these arguments, the ruling emphasized that the distributed items are indeed gifts as they are given without direct consideration at the time of supply. The consideration mentioned by the applicant (increased sales and brand value) is indirect and not immediate. The ruling highlighted that the CGST Act does not recognize FOC supplies as a separate category and that company policies cannot override statutory provisions.

Consequently, the ruling concluded that the company is ineligible to avail input tax credit for such goods supplied during the marketing events due to the bar under Section 17(5)(h) of the CGST Act, which restricts credit of input tax with respect to gifts.

Ruling:
1. The goods procured by BMW India and supplied during promotion/marketing events qualify as being used in the course or furtherance of business in terms of the CGST/HGST Act, 2017.
2. The company is ineligible to avail input tax credit for such goods supplied in the marketing events owing to the bar of clause (h) of sub-section (5) of section 17.

Ordered accordingly.

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