2018 (10) TMI 747 - AAR - GST

Taxable Supply: Complimentary Tickets & Input Tax Credit under CGST Act

The case involved a ruling on whether issuing free tickets as 'Complimentary Tickets' constitutes a taxable supply under the CGST Act, 2017 and if Input ... Levy of GST - Supply or not? - free tickets given as “Complimentary Tickets” - input tax credit - Circular No. 47/21/2018-GST dated 8th June 2018 - CGST Act, 2017. The applicant has withdrawn his Advance Ruling application while indicating that his case is similar to the case of an Original Equipment Manufacturer (OEM) which has been discussed by the said circular as not constituting a supply, and the ‘concerned officer’ has reached a conclusion diametrically opposite that the activity of the applicant of supplying complementary tickets free of charge would amount to supply. Therefore, allowing for withdrawal of the present application in terms of the applicant, without discussing the case on merits would not be in public interest. Hence, circumstances call for discussion on merits rather than allowing withdrawal, especially when both interested parties to the Advanced Ruling application hold contrary views. Whether free tickets given as “Complimentary Tickets” falls within the definition of supply under CGST Act, 2017 and thus, whether the applicant is required to pay GST on such free tickets? Whether the applicant is eligible to claim Input Tax Credit in respect of complimentary tickets? Held that:- While, the said Circular dated 8.6.2018 clarifies the case of an OEM where he is providing Dies and Moulds owned by him free of cost to a component manufacturer, who further uses these to make components for the OEM and supply such components back, this situation cannot be compared to the situation of handing out complementary tickets for viewing Cricket matches by any stretch of imagination - In the present case, there is no owned property of the applicant being given to the receiver for the purpose of being used for value addition and in making of inputs which are received by the applicant, Therefore, the case of the applicant is differentiated from the case of the OEM which is the basis of Circular, and hence the contention of the applicant that the questions posed by him in the present Advance Ruling application stand answered by the said Circular does not hold any force. Perusal of the definition of the word ‘consideration’ shows that it is an inclusive definition and covers not only payments made in money terms or otherwise as mentioned in section 2(31)(a) but also the monetary value of any act of forbearance in respect of supply of services, whether by the recipient (in this case the complimentary ticket receiver) or by any other person (which in this case would also include the applicant) in terms of Section 2(31)(b) - In the present case when the applicant issues a ‘complimentary ticket’ to any person, the applicant is certainly displaying an act of forbearance by tolerating persons who are receiving the services provided by the applicant without paying any money, which other persons not receiving such complimentary tickets’ would have to pay for. The monetary value of this Act of forbearance would naturally be pegged to the amount of money charged from other persons not receiving the ‘complementary tickets’ for availing the same services - The complementary ticket given by the applicant to various persons would certainly be covered by the term ‘token’ and ‘voucher’ which are both defined relatedly in the Oxford English Dictionary. The contention of the applicant that since complementary ticket recipient does not make any payment to the applicant. it can be said that supply of tickets is without any consideration and is accordingly not covered under Section 7(1) (a) of the CGST Act. 2017, would not stand the test of legal interpretation of Section 7 of the CGST Act, 2017 and would thus be fallacious - the activity of the applicant in issuing complementary tickets to persons is covered under each limb of para 5(e) of Schedule II of the CGST Act, 2017. Therefore, by this measure too, the activity of the applicant of providing complementary tickets free of charge to some persons for enjoying cricket matches would also be covered under the scope of supply as per section 7(1)(d). The activity of the applicant of providing complementary tickets free of charge to some persons would be considered supply of service as per provisions of both Section 7(1)(a) and 7(1)(d) and would therefore be leviable to tax as per provisions of Section 9 of the CGST Act, 2017 and the parallel Section 9 in the Punjab Act, 2017. Input tax credit - Held that:- Since the activity of providing the complementary tickets would amount to supply under provisions of CGST Act and parallel provisions of Punjab GST Act, 2017 and would be leviable to tax under section 9 of the said Acts. the question of whether Input Tax Credit would be available on inputs going into such complementary tickets would be answerable in affirmative. The question of proportional availment of ITC comes into play only when part of the final goods or services are taxable and part of them are exempt. In the present case since all tickets supplied by the applicant including complementary tickets would be taxable, the applicant would clearly be eligible for claim of Input Tax Credit as per the provisions of Section 16 of the CGST Act,2017. Thus, the applicant would not be eligible to take credit on the tax leviable on supply of complementary tickets by him, but would be eligible to avail credit of input and input service going into provision of supply of the impugned complementary tickets. Ruling:- The activity of the applicant of providing complementary tickets free of charge to some persons would be considered supply of service as per provisions of both Section 7(1)(a) and 7(1)(d) and would therefore be leviable to tax as per provisions of Section 9 of the CGST Act, 2017 and the parallel Section 9 in the Punjab GST Act, 2017. Since all tickets supplied by the applicant including complementary tickets would be taxable, the applicant would clearly be eligible for claim of Input Tax Credit as per the provisions of Section 16 of the CGST Act, 2017. Issues Involved:1. Whether free tickets given as “Complimentary Tickets” fall within the definition of supply under the CGST Act, 2017.2. Whether the applicant is eligible to claim Input Tax Credit (ITC) in respect of complimentary tickets.Issue-wise Detailed Analysis:1. Definition of Supply for Complimentary Tickets:The applicant, M/s. K.P.H. Dream Cricket Private Limited, sought an advance ruling on whether free tickets given as 'Complimentary Tickets' fall within the definition of supply under the CGST Act, 2017, and whether GST is applicable on such free tickets.The core argument presented by the applicant was that complimentary tickets are provided without any consideration and hence should not fall under the definition of supply as per Section 7 of the CGST Act, 2017. They referenced the inclusive definition of 'supply' under Section 7, which encompasses all forms of sale, transfer, barter, exchange, etc., made for a consideration in the course or furtherance of business. The applicant argued that since complimentary tickets are given without consideration, they should not be taxable.However, the Authority for Advance Ruling (AAR) examined the definition of 'consideration' under Section 2(31) of the CGST Act, which includes any payment made or to be made, whether in money or otherwise, and the monetary value of any act or forbearance in respect of the supply of goods or services. The AAR concluded that issuing complimentary tickets involves an act of forbearance, as the applicant tolerates the recipient enjoying the services without payment, which other customers pay for. This act of forbearance is considered a form of consideration.Furthermore, the AAR referred to Rule 32(6) of the CGST Rules, 2017, which states that the value of a token, voucher, or coupon redeemable against a supply of goods or services shall be equal to the money value of the goods or services redeemable against such token or voucher. Complimentary tickets fall under this category, thus having a monetary value equivalent to the paid tickets.Additionally, the AAR highlighted Section 7(1)(d) of the CGST Act, which includes activities specified in Schedule II, such as agreeing to the obligation to tolerate an act or situation as a supply of services, regardless of consideration. Therefore, the issuance of complimentary tickets is considered a supply of service under both Section 7(1)(a) and Section 7(1)(d) of the CGST Act, 2017, and is subject to GST.2. Eligibility for Input Tax Credit (ITC):The second issue addressed was whether the applicant is eligible to claim ITC on inputs used for providing complimentary tickets. The AAR examined the provisions of Section 16 of the CGST Act, 2017, which allows registered taxable persons to take credit of input tax charged on any supply of goods or services used in the course or furtherance of business.Since the activity of providing complimentary tickets is considered a taxable supply, the applicant is eligible to claim ITC on inputs and input services used in providing these tickets. The AAR clarified that the ITC is available for inputs and input services going into the provision of complimentary tickets but not on the tax levied on the supply of the complimentary tickets themselves.Conclusion:The AAR ruled that the activity of providing complimentary tickets free of charge is considered a supply of service under the CGST Act, 2017, and is subject to GST. Consequently, the applicant is eligible for ITC on inputs and input services used in the provision of these complimentary tickets, as per Section 16 of the CGST Act, 2017.