Complimentary tickets to related persons constitute deemed supply under section 7, no ITC available for exempt supplies under section 17(2)

The AAAR held that providing complimentary tickets without consideration does not constitute supply under GST Act. However, when such tickets are provided to related persons or distinct persons as defined under sections 15 and 25, it becomes deemed supply per section 7 read with Schedule I. Regarding input tax credit, the authority ruled that since complimentary tickets constitute exempt supply, ITC cannot be availed under section 17(2). The appellant cannot claim ITC for non-taxable activities, except where the transaction is treated as deemed supply to related/distinct persons, in which case ITC entitlement arises.

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Issues Involved:
1. Taxability of Complimentary Tickets
2. Applicability of Section 7(1)(a) and 7(1)(d) of the CGST Act, 2017
3. Interpretation of the term "Consideration"
4. Eligibility for Input Tax Credit (ITC)
5. Right of Withdrawal of Application
6. Validity of the Ruling Pronounced Beyond the Prescribed Time Limit

Detailed Analysis:

1. Taxability of Complimentary Tickets
The primary question was whether the activity of providing complimentary tickets falls within the definition of "supply" under the Punjab GST Act, 2017/CGST Act, 2017, and whether the appellant would be required to pay tax on such complimentary tickets. The appellant argued that complimentary tickets are provided without any consideration as a goodwill gesture for the promotion of business, thus should not be treated as supply under section 7 of the Act.

2. Applicability of Section 7(1)(a) and 7(1)(d) of the CGST Act, 2017
The appellant contended that Section 7(1)(a) of the CGST Act, 2017 does not cover free supply. They argued that the definition of supply requires consideration, which is absent in the case of complimentary tickets. Furthermore, the appellant highlighted that Section 7(1)(d) was omitted post-amendment, making the application of this section irrelevant for complimentary tickets.

3. Interpretation of the Term "Consideration"
The definition of "consideration" under Section 2(31) of the CGST Act was examined. It was noted that consideration includes any payment in money or otherwise, in respect of, in response to, or for the inducement of the supply of goods or services. The appellant argued that there is no consideration flowing from the recipient to the supplier in the case of complimentary tickets. The ruling discussed various interpretations and precedents, including those from the Indian Contract Act, 1872, and international tax authorities, to conclude that the complimentary tickets do not involve any consideration.

4. Eligibility for Input Tax Credit (ITC)
The appellant claimed eligibility for ITC on inputs and input services used for providing complimentary tickets. The ruling clarified that ITC is directly linked to the taxability of the outward supply. Since the distribution of complimentary tickets does not qualify as a taxable supply, it is considered an exempt supply, and thus, ITC cannot be availed for such activities.

5. Right of Withdrawal of Application
The appellant argued that their request to withdraw the application for advance ruling was wrongly denied by the Ld. AAR. They cited precedents where withdrawal requests were accepted and emphasized that the withdrawal should not be denied unless the applicant has obtained some advantage or benefit. The ruling, however, did not specifically address this issue in the final decision.

6. Validity of the Ruling Pronounced Beyond the Prescribed Time Limit
The appellant pointed out that the ruling by the Ld. AAR was pronounced beyond the 90-day period prescribed under Section 98(6) of the CGST Act. The application was filed on 04.04.2018, and the order was passed on 20.08.2018. The ruling did not specifically address this procedural lapse in the final decision.

Final Decision:
1. Taxability of Complimentary Tickets: The activity of providing free complimentary tickets does not fall within the domain of supply as it lacks the element of consideration. However, if such tickets are provided to a related person or distinct person, they fall within the ambit of supply due to Schedule I of the Act, and the appellant would be liable to pay tax on the same.

2. Eligibility for ITC: The appellant is not eligible to avail ITC for the activity of providing complimentary tickets as it is considered an exempt supply. However, if the tickets are provided to a related or distinct person and treated as supply, the appellant would be entitled to avail ITC for the same.

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