GST Exemption for Extra Cigarette Packs under Single Supply Transaction

The extra packs of cigarettes, offered as part of a quantity discount without additional consideration, are not individually leviable to GST. They are considered part of a single supply transaction where a single price is charged for the entire supply, in line with Circular No. 92/11/2019-GST. Consequently, the extra packs do not attract additional GST. Additionally, since the extra packs are not separately leviable to GST, the question of attributing a taxable value to them does not arise. Furthermore, the extra packs do not qualify as exempt supplies or free samples, as they are part of a supply transaction and not provided free of cost.

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Issues Involved:
1. Whether the extra packs of cigarettes would be leviable to GST.
2. The taxable value which can be attributed to such extra packs of cigarettes for levy of GST.
3. Whether extra packs of cigarettes would be considered as exempt supplies or free samples and hence attract the provisions of Section 17(2) of the CGST Act, 2017 read with Rule 42 of the CGST Rules, 2017 or clause (h) of Section 17(5) of the CGST Act, 2017.

Detailed Analysis:

Issue 1: Whether the extra packs of cigarettes would be leviable to GST
The applicant, a seller of cigarettes, intends to offer extra packs of cigarettes (quantity discount) without additional consideration as part of a new marketing strategy. The applicant will charge GST and Compensation Cess on the total value of the transaction, which includes both the normal and extra quantity of cigarettes. The applicant sought clarification on whether the extra packs would be subject to GST.

Observation: The Authority for Advance Ruling (AAR) referred to Circular No. 92/11/2019-GST dated 07.03.2019, which clarifies that in schemes like "Buy One, Get One Free," the transaction should be treated as a supply of two goods for the price of one. It is not considered an individual supply of free goods but rather two supplies where a single price is charged for the entire supply.

Conclusion: The extra packs of cigarettes are not individually leviable to GST as they are part of a single supply transaction where a single price is charged for the entire supply. Therefore, the extra packs are not subject to additional GST.

Issue 2: The taxable value which can be attributed to such extra packs of cigarettes for levy of GST
Given that the extra packs are not independently leviable to GST, the question of attributing a taxable value to them does not arise.

Conclusion: As the extra packs are part of a single supply transaction and not separately leviable to GST, this question is not applicable.

Issue 3: Whether extra packs of cigarettes would be considered as exempt supplies or free samples
The applicant queried whether the extra packs would be considered as exempt supplies or free samples, thereby attracting the provisions of Section 17(2) of the CGST Act, 2017 read with Rule 42 of the CGST Rules, 2017 or clause (h) of Section 17(5) of the CGST Act, 2017.

Observation: The AAR noted that since the extra packs are part of a single supply transaction and not supplied free of cost without consideration, they do not qualify as exempt supplies or free samples. The Circular No. 92/11/2019-GST also supports this view by stating that such transactions should be treated as supplying two goods for the price of one, and ITC shall be available for inputs, input services, and capital goods used in relation to such supplies.

Conclusion: The extra packs of cigarettes will not be considered as exempt supplies or free samples. Consequently, the provisions of Section 17(2) read with Rule 42 of the CGST Rules, 2017 or clause (h) of Section 17(5) of the CGST Act, 2017 will not be applicable.

Order:
1. Question (i): Whether the extra packs of cigarettes would again be leviable to GSTRs.
- Answer: No, the extra packs are not independently leviable to GST.

2. Question (ii): The taxable value which can be attributed to such extra packs of cigarettes for levy of GSTRs.
- Answer: Not applicable, as the extra packs are not independently leviable to GST.

3. Question (iii): Whether extra packs of cigarettes would be considered as exempt supplies or free samplesRs.
- Answer: No, the extra packs will not be considered as exempt supplies or free samples, and the provisions of Section 17(2) read with Rule 42 of the CGST Rules, 2017 or clause (h) of Section 17(5) of the CGST Act, 2017 will not apply.

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