Input tax credit on sales promotion rewards barred where scheme benefits were treated as gifts without consideration.

Input tax credit under GST was examined for goods and input services procured for a sales promotion scheme. Section 16 permits credit only for inputs used in the course or furtherance of business, but section 17(5) bars credit where goods or services are used for personal consumption, or where goods are given as gifts or free samples. The reward items and travel benefits distributed to retailers on achievement of targets were treated as benefits supplied without consideration, and the evidence did not show that their cost formed part of the taxable outward supply. Credit was therefore held inadmissible and the denial of input tax credit was affirmed.

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Issues: Whether the input tax credit on goods and input services procured for the Buy n Fly sales promotion scheme was admissible under the GST law.

Analysis: Section 16 allows input tax credit only for goods or services used or intended to be used in the course or furtherance of business, but section 17(5) imposes a specific embargo on credit where the goods or services are used for personal consumption or where goods are disposed of by way of gift or free samples. The reward items and travel benefits under the scheme were procured for distribution to retailers on achievement of targets and were not shown, on the evidence placed, to be part of the appellant's own taxable outward supply or to have their cost duly established in the final product pricing. The scheme rewards were treated as benefits given without consideration, and the appellant's reliance on business promotion and contractual obligation did not displace the statutory restriction in section 17(5).

Conclusion: The input tax credit was not admissible and the ruling denying credit was affirmed.

Final Conclusion: The appeal failed and the advance ruling was left undisturbed, with no interference in the denial of input tax credit on the scheme-related procurements.

Ratio Decidendi: Where goods or services procured for a sales promotion scheme are ultimately used as rewards without consideration, and fall within the statutory exclusions in section 17(5), input tax credit is not available notwithstanding a claim of business promotion.

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