TaxTMI 
TaxTMI 
2018 (10) TMI 747
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....applicant is eligible to claim Input Tax Credit (for short "ITC") in respect of complimentary tickets? In this regard, comments from the concerned officer i.e. Assistant Commissioner of State Taxes, S.A.S. Nagar, Mohali were sought. The concerned officer vide his letter dated 24-05-2018 stated that free tickets given as "Complimentary Tickets" fall within the definition of supply under CGST Act, 2017 and thus, the applicant is required to pay GST on such free tickets and applicant is also eligible to claim Input Tax Credit in respect of complimentary tickets. A personal hearing of the applicant in this regard was held on 16.07.2018 before the Advance Ruling Authority, Punjab on which date Sh. Praveen Kashyap and Sh. Adarsh Gupta, Consultants of the firm appeared on behalf of the applicant. The questions raised by the applicant were discussed at length. The consultants requested for adjournment for submission of documents. On their request. the case was adjourned with the directions to submit written submission by 30-07-2018. The applicant has sent written submission through e-mail received on 30-07-2018, which is reproduced as under: Written submissions & synopsis by the A....
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....ture etc. This inter-alia require fresh thoughts for treatment of various transactions and events. 8. While the term free supply' is not defined under GST law or the erstwhile indirect tax laws, a 'free supply' as the name suggests is a supply of goods or services without any consideration (Monetary or Kind). We find it pertinent here to understand the treatment of free supply under pre-GST regime: a. Free supply of goods was not taxable as Value Added Tax (VAT)/ Central Sales Tax (GST) was chargeable only on 'sales'. The term 'Sales' was defined under the Sale of Goods Act, 1930 which was followed to State VA T laws to mean a transfer of goods for a consideration. b. Free supply of services was not chargeable to Service Tax as Service Tax was liable to be paid on the gross amount charged for services, and the term 'service' was defined to mean an activity provided by one person to another for consideration, Under the GST regime, treatment of free supply has undergone a change on following grounds - • Firstly, the treatment of free supplies made to related and unrelated parties differ • Secondly. even though GST was contemplated to treat goods ....
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.... person. 12. In light of the above stated legal provisions and discussion, it is view of the applicant that the activity of providing complimentary tickets without any consideration on account of courtesy/public relationship/business promotion would not fall under the definition of supply as given under Section 7 of the CGST Act, 2017 and Schedule I of CGST Act, 2017 and thus not exigible to GST. Input tax credit 13. One of the major advantages sought to be achieved from implementation of GST is the removal of cascading effect by facilitating seamless flow of credit. The "statement of Objects and Reasons" to the Constitution (122nd Amendment) Bill, 2014, enacted as the Constitution (101st Amendment) Act, 2016 categorically includes elimination of cascading effect This would be achieved by providing for the availment of Input tax credit to the purchasing dealer in respect of the tax charged by the supplying dealer 14. With a view to avoid the cascading effect o/ taxes and build-up of tax costs. the government has consciously streamlined the credit restrictions applicable under the GST regime. Section 17(5) specifically restricts credit of input tax on "goods disposed of ....
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....nput services are said to be used in furtherance of business, the use of such supplies should help in achieving the objectives of the business in a better and effective way, thus corresponding credit is allowed. 18. Section 17(2) provides that where the goods and /or services are used partly for effecting taxable supplies including zero-rated under this act or under the IGST Act, 2016 and partly for effecting exempt supplies under the said acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. Supply of complimentary tickets is not a supply in itself and thus cannot be said to be an exempt supply. 19. Further Section 17(3) provides that the value of exemption supply under sub section (2) shall be such as may be prescribed Reference to chapter V (Input Tax credit) of CGST Rules 2017, there is no valuation mechanism prescribed for free supplies. Explanation to Rule 42 of CGST Rules 2017 clarifies 'For the purpose of this clause, it is hereby clarifies that the aggregate values of exempt supplies and the total turnover shall exclude the amount of any duty or tax levied under entry ....
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....annual awards dinner for a footballers' association, for which it purchased trophies for presentation to the player of the year and other award winners. The association's members purchased tickets for the dinner at a price fixed by the company with the aim of covering the expenses incurred. The company collected VAT on the sale of such tickets sold and also claimed a VA T credit in respect of the input tax paid on the purchase of trophies. The credit was disputed on the grounds that the trophies were distributed free of cost and therefore, no credit could be claimed. The House of Lords held that where a direct link could be shown between the giving of those assets and consideration received by the taxpayer from persons other than the recipients, that the awards dinner had been organized as a self-supporting event, for which the ticket receipts were intended to cover the total cost including the provision of trophies; and that accordingly, the purchase of the tickets provided the consideration for the supply of trophies to the award winners and output tax was not payable separately by the company on that value. Circular No. 47/21/2018-GST dated 8th June 2018 25. We, respectful....
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....kets ? We, respectfully wish to bring to your notice that CBIC has issued a clarification vide Circular No. 47/21/2018-GST dated 8th June 2018 vide which it has been clarified that supply of FOC basis does not constitute a supply as there is no consideration involved. It also clarifies that where FOC supply is made in the course of furtherance of business, there is no requirement of reversal of credit Relevant abstract of the circular is re-produced hereunder- SLNo. Issue Clarification 1.1 Whether moulds and dies owned by Original Equipment Manufacturers (OEM) that are sent free of cost (FOC) to a component manufacturer is leviable to tax and whether OEMs are required to reverse input tax credit in this case? 1.1 Moulds and des owned by the original equipment manufacturer (OEM) which are provided to a component manufacturer (the two not being related persons or distinct persons) on FOC basis does not constitute a supply as there's no consideration involved. Further, since the moulds and dies are provided on FOC basis by the OEM to the component manufacturer in the course or furtherance of his business, there is no requirement for reversal of input tax cre....
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....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. 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. 3. For answering the question of whether free tickets given as "complementary tickets" fall within the defini....
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....f a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp. " 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. On website https://en.oxforddictioners.com/defination/token token is defined as 'a voucher that can be exchanged for goods or services, typically one given as a gilt or forming part of a promotional offer'; and on website https://en.oxforddictioners.com/defination/token/voucher voucher is defined as a small printed piece of paper that entitles the holder to a discount or that may be exchanged for goods or services'. 6. Therefore. 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 ....
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....ng any complementary ticket and who has not paid any money from receiving services provided by the applicant. The applicant is also agreeing to the obligation of tolerating the act of the recipient to enjoy services provided by the applicant free of charge and the applicant is also agreeing to the obligation of doing the act of allowing entry to the complementary ticket holder to enjoy services being provided by the applicant when he issues such complementary ticket, Thus, it is seen that 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). 9. In view of the above discussion and findings, it would be clear that 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 Se....