TaxTMI 
TaxTMI 
2019 (3) TMI 540
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.... periodically. So whether the ITC can be claimed in all such similar schemes. At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH THE ADVANCE RULING IS SOUGHT 1. This Application is being filed by M/s. Biostadt India Limited ('the Applicant'/the Company'). The Applicant, having Good and Service Tax (GST) Registration No. 27AACCB1830G123 is inter alia engaged in the business of developing, manufacturing and distributing crop protection chemicals and hybrid seeds. 2. Biostadt India Limited has been serving the farming community for over th....
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....ring the scheme are as under: Products Qty.(kgs/Itrs) Biozyme Liquid 250 Biozyme Granules 1000 Amaze-X 200 Rejoice 30 Roko 50 Biomycin 50 Maiden 20 Collections: If the customers after lifting the products from the applicant, make payment in the prescribed staggered manner shall be entitled to one 8 grams Gold coin. The payment schedule for the customers during the scheme is as under: Month Collection Amount (Rs.) June 1 lakh July 1.5 lakh Aug 1.5 lakh Total 4 lakh c. Only the above mentioned products are eligible under the scheme. d. Stock returns are not allowed under the said scheme. e. No other discounts are eligible under the said scheme. f. Both the legs of the scheme are independent of each other. Customer satisfying any one leg will be entitled to reward of that leg only. g. A meeting will be called at the end of the scheme period and customers who have satisfied either of the lifting or collection criteria shall be entitled to attend such meeting. h. During the meeting the customer shall be rewarded with the 8gms or 10 gms gold coin depending upon the criteria fulfilled by him. 10. The above mentioned scheme is in force. The applicant will....
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....ods which are used or intended to be used by a supplier in course or furtherance of business. Gold coins are inputs for the applicant and GST levied on such purchase qualifies to be an input tax for the purpose of Section 16(1) read with Section 2(62) of the CGST Act. In course or furtherance of business: The notable requirement under Section 16(1) of the CGST Act is that the credit of input tax claimed on a supply of goods or services should be used in course or furtherance of the business. While the term business is defined under CGST act, the phrase "in course or furtherance of business" is not defined in the law. Dictionary meaning of the term "furtherance" implies advancement, promotion of scheme, etc. Therefore furtherance of business would imply advancement of business, promotion of business. Any activity carried on with a purpose to achieve business objectives, business principles, business continuity and stability would per se amount to an activity in course or furtherance of business. The applicant has launched Kharif Gold scheme with an intention to maximize the sales and collections of the company. The scheme so implemented grants an advantage to the applicant over....
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.... The Gift-Tax Act (18 of 1858) had defined the word gift to mean transfer by one person to another of any existing movable or immovable property voluntarily and without consideration in money or money's worth. The Honorable Supreme Court cited the definition of 'gift' from Corpus Juris Secundum, Volume 38 in the case of Sonia Bhatia v. State of UP [1981 SCR (3) 239,1981 SCC (2) 585) = 1981 (3) TMI 250 - SUPREME COURT as follows: "A 'gift' is commonly defined as a voluntary transfer of property by one to another, without any consideration or compensation therefor. A 'gift' is a gratuity and an act of generosity and does not require a consideration, but there can be none; if there is a consideration for the transaction, it is not a gift. 2.10. On the basis of above jurisprudence, one can reasonable conclude that gift is a gratuity and does not require any consideration. If a consideration is attached to a transaction, then it cannot be termed as a gift. Emotional consideration such as love, affection, etc. may be attached to a gift but there cannot be a monetary consideration to a gift. It may also be noted that gift cannot arise out of a contractual obligation. If a supply is ma....
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....* Prices of the products vary for different SKUS * No Stock Returns under the scheme. * In case of any discrepancy company reserves the right to modify/cancel the scheme without prior notice THE CENTRAL GOODS AND SERVICE TAX ACT (CGST), 2017 Relevant provisions under CGST Act, 2017: 1. Inputs [Section 2(59)1: "Input" means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. 2. Input Tax [Section 2(62)1: "Input tax" in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes (a) the integrated goods and services tax charged on import of goods; (b) the tax payable under the provisions of sub-sections (3) and (4) of section 9; (c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act; (d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or (e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Uni....
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....assengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods; (b) the following supply of goods or services or both (i) food and beverages, outdoor catering, beauty' treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; (iii) rent-a-cab, life insurance and health insurance except where- (A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or (B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and (iv) travel benefits extended to employees on vacation such as leave or home travel concession; (C) works....
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....2018 & in the course of preliminary hearing wherein we have sought ruling on admissibility of input tax credit of tax paid on purchase of gold coins for our sales scheme. Without rejudice to written submissions dated 23.08.2018, we further submit that: * Tax paid on purchase of Gold coins qualifies as Input Tax: * Input tax as defined under section 2(62) of the CGST Act includes CGST, respective SGST and UTGST, IGST and so on. * Section 2(63) of the CGST Act defines Input tax credit as the credit of input tax. * Inputs is defined under Section 2(59) of the CGST Act to mean any goods other than capital goods which are used or intended to be used by a supplier in course or furtherance of business. * Gold coins are inputs for the applicant and GST levied on such purchase qualifies to be an input tax for the purpose of Section 16(1) read with Section 2(62) of the CGST Act. * Gold coins not given away as gift: --- A Section 17(5) of the CGST Act provides for blocked credits. --- As per section 17(5)(h) registered person is not entitled to claim ITC of tax paid Re g n goods given away as gift or free sample. --- Erstwhile Gift Tax Act defined gift to mean transfer by one ....
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....deration received from the customers for sales made by us. --- Section 15(1) criteria is satisfied in our case and hence value of supply of goods should include only the price that is payable by the customer. Value of gold coins cannot be clubbed with value of supply made by us. --- Moreover, cost of gold coin to be distributed at the end of scheme is factored in sales price charged by us. As a result, we are indirectly discharging GST liability on gold coin supplied by us. --- Further none of the conditions mentioned U/s 15(2) are satisfied to include the value of gold coin in the value of supply. --- We would further submit that when a 'commercial common sense approach is adopted, the term 'free' is being used in a marketing sense, but the economic and commercial reality of the offer is that value of gold coin is already included in the value of goods supplied to the customer. --- We rely on the judgement of Hon'ble first tier tax tribunal in United Kingdom in the case of Marks & Spencer PLC in support of our contention above. The copy of said judgement is enclosed at Annexure ""B". Hence reading Section 15 in conjunction with Section 2(31) it is abundantly clear that value ....
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....e of a business or not. Each case would need to be examined, based on its facts, on the touchstone of the definition of inputs'. 5. In the course or furtherance' is not defined, but is broad enough to cover any supplies made in connection with the business. It is important to note that only supplies received by a taxable person that are used/ consumed in the course or furtherance of business are eligible for claiming input tax credit. This impacts the eligibility to claim input tax: credit. Hence, it becomes important for an entity to justify that a particular act is done in the course and furtherance of its business goals and intentions. 6. We can determine whether a activity is undertaken in the course or furtherance of business on the basis of few principles: a. Was the activity undertaken in line with the basic business model? b. Is the activity needed for continuity in the supply? c. Is the activity' mainly concerned with the making taxable supply for consideration? 7. Therefore, if some supply is either used exclusively in the course/furtherance of business or partly used in the course/ furtherance of business, the basic provision enabling the claim of credit does not c....
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....tion 17(5.) should prevail. It would be appreciated that Section 16 is a general provision and Section 17(5) is specific. Section 17(5) over rides Section 16 in clear words. Furthermore, though 17(5) is non obstante clause unless Section 16 conditions fulfilled ITC is not eligible and once eligible if not hit by 17(5), only then ITC can be availed. 3. The basic intention behind Section 17(5)(h) seems to be that it tries to restrict people from giving benefits or exchange consideration in kind (in lieu of cash) in the garb of gifts to avoid valuation and thus avoid levy of tax, In the instant case, the Gold Coins are gifts/ free supplies in course of business. If consideration for these goods is not charged directly; they shall qualify as "gifts" and ITC shall not be eligible. 4. If these 'gold coins' are not treated as gifts, another argument can be considered then as 'discount'/ 'hidden discount and the said discount satisfies the conditions under Section 15(3), i.e. the discount (whether in full or in part) arises and is recorded as a contractual obligation under specific invoice(s), TC shall be available on such goods. It may be worthwhile to show such goods under the respecti....
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....Mumbai Central CGST & C. Ex. Commissionerate 04. HEARING The Preliminary hearing in the matter was held on 18.09.2018, Sh. Parag Mehta, C.A. Along with Sh. Jinesh Shah, C.A. and Sh. Prashant Nagar, manager appeared and requested for admission of application as per details in their application. During hearing Jurisdictional Officer Sh. Vivek Anand Assistant Commissioner, Division-VIII, CGST & C. Ex., Mumbai Central GST Commissionerate appeared and stated that they would making submissions in due course. The application was admitted and called for final hearing on 11.12.2018, Sh. Parag Mehta, C.A. along with Sh. Jinesh Shah, C.A. and Sh. Prashant Nagar, manager appeared made oral and written submissions. The Jurisdictional Officer Sh. Vivek Anand Assistant Commissioner, Division-VIII, CGST & C. Ex., Mumbai Central GST Commissionerate appeared made written submissions. 05. OBSERVATIONS We have gone through the facts of the case. The issue put before us is in respect of a future transaction which would be on the lines thus - The applicant is engaged in the business of developing, manufacturing and distributing crop protection chemicals and hybrid seeds and in order to achieve sal....
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....ld coins are inputs for them and GST levied on such purchase qualifies to be an input tax for the purpose of Section 16(1) read with Section 2(62) of the CGST Act. We find that the provisions of ITC are governed by Sections 16 and 17 of the CGST Act, 2017. In order to avail ITC, two basic provisions need to be complied with, i.e. Section 16 and Section 17. As per Section 16, a taxpayer is entitled to take credit of input tax charged on any supply of goods or services to him which are used in the course or furtherance of his business, i.e this section disallows ITC against input goods/services used for non-business purposes. Section 17 (5) of the CGST Act deals with Blocked credits and begins with a non obstante clause, which means even if Section 16 (1) allows ITC, Section 17(5) shall block in respect of certain cases. Clause (h) of Section 17(5) deals with ITC on gifts and as per Section 17(5)(h), "Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. We will therefore first discuss wheth....
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....ocured with levy of input tax and are supplied without tax being paid on such output supplies, the scheme of the GST Act provides no input tax credit, except export. Schedule I to the CGST Act, 2017 deals with activities to be treated as supply even if made without consideration. As per Entry Number 2 to Schedule I (2), Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. The above provisions and Section 17 (5) (h) stipulate that any goods disposed off, by way of gift are not eligible for ITC and that even if supply is in course or furtherance of business between related or distinct persons, it shall be considered as supply except to the extent of fifty thousand rupees in a financial year, when given by an employer to its employee. Further under Section 17(5), no ITC on any goods can be availed, if they are given as gifts, whether or not in course of furtherance of business. As a corollary if....