TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 1357
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....tributors. The price range of these cigarettes of a pack of 10 will be in the range of Rs. 50/- to 200/- (depending upon the brand). MRP will be printed on each pack of Cigarettes. However, as marketing strategy to counter competition, instead of supplying a quantity of say 100 packs for an agreed price of say Rs. 5000/- they would be supplying 110 packs of Cigarettes without recovering any additional cost from the Distributors. The Applicant would be paying GST and Compensation Cess on Rs. 5000/- at applicable rate. Clarification sought from Hon'ble Authority for Advance Ruling: (i) In the above transaction, whether the extra packs of Cigarettes would again be leviable to GST? (ii) If yes, the taxable value which can be attributed to such extra packs of Cigarettes for of GST? (iii) 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? 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 pro....
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....nd collected. The Applicant will prepare the Tax invoice showing total quantity of Cigarettes as 110 packs and Taxable Value as Rs. 15,000/- and calculate thereon the GST and Compensation Cess. A copy of an Invoice intended to be used by the Applicant on roll out of this Sales Promotion measure is enclosed and marked as EXHIBIT B. As required under Legal Metrology (Packaging Commodity) Rules 2011, MRP would be printed on each of the said 110 packs of Cigarettes. The packs of Cigarettes containing additional quantity would not indicate that the same are free supplies or are in any manner different from the packs of Cigarettes in the original quantity. The Distributor has the option to either pass on or otherwise, the benefit of additional quantity of Cigarettes packs received within the price of the original quantity to their stockists or retailers, as the case may be. d. Based on the above the Applicant seeks clarification/suggestion/ validation from the Hon'ble Advance Ruling Authority as under: (a) In the above transaction, whether the extra packs of Cigarettes would again be leviable to GST? (b) If yes, the taxable value which can be attributed to such extra packs of Ciga....
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....edule of the CGST Act, 2017 since such supply is neither a transfer or disposal of business assets nor supply of goods between distinct persons, supply of goods by a principal to his agent or vice-versa. The Applicant seeks validation to this effect from the Hon'ble Authority for Advance Ruling. v. Since the entire quantity of Cigarettes supplied to their Distributors including additional quantity, would find reflection in the Invoice along with taxable value thereof, the taxable value so mentioned in the Invoice would correspond to the entire quantity of Cigarettes supplied under the said Invoice, including the additional quantity. Hence, it cannot be a case of free supply without consideration and thus such supply of original quantity along with additional quantity would be supply as indicated in clause (a) to sub-section (l) of Section 7 of the CGST Act, 2017. The Applicant seeks validation to this effect from the Hon'ble Authority for Advance Ruling. vi. As per sub-section (I) of Section 15 of the CGST Act 2017 the value of supply of goods or services or both shall be transaction value, which is the price actually paid or payable for the said supply of goods or services or ....
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....ion 17 of the CGST Act, 2017 or of clause (h) of sub-section (5) of Section 17 of the CGST Act, 2017 will not be attracted. The Applicant seeks validation to this effect from the Hon'ble Authority for Advance Ruling. 3b. Additional submission on 06.04.2019. Facts of the case 1) In order to promote growth and boost sales of the company, we are intending to launch a promotion scheme for all our distributors. The promotion scheme that is proposed to be unveiled by the company will be applicable for all our distributors. 2) As per this new sales promotion strategy the Applicant intends to supply additional packs of Cigarettes along with regular supply of cigarettes of a particular quantity, without receiving any additional consideration. In other words a specific number of cigarettes/cigarette packs will be supplied to our customers along with a particular quantity purchased for the price of that particular quantity. The scheme which is intended to be offered by applicant will be as follows of; a. The company plans to offer an additional 10 packs of cigarettes on purchase of 100 packs of cigarettes and this offer will remain steady, i.e. if a distributor places an order for 100 p....
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....lacing the orders for supply of cigarettes from us, will be well aware of the quantum of additional packs of cigarettes which will be supplied to them. 5) As required under Legal Metrology (Packaging Commodity) Rules 2011, MRP would be printed on each of the said 110 packs of Cigarettes. The packs of Cigarettes containing additional quantity would not indicate that the same are free supplies or are in any manner different from the packs of Cigarettes in the original quantity. 6) Applicant would like to bring attention of the Honourable Authority that there has been development in our case post the filing of our Advance Ruling Application. The CBIC has issued a circular with File Number 92/11/2019-GST dated March 7, 2019. Wherein they have provided clarification on various doubts related to treatment of sales promotion schemes under GST. The government has examined various schemes and clarifications on the aspects of taxability, valuation, availability or otherwise of Input Tax Credit in the hands of the supplier in relation to following schemes : a) Free samples and gifts b) Buy one get one offer c) Discounts including Buy more, save more offers d) Secondary Discounts 7)....
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....te with increase in purchase volume). For examples Get 10 % discount for purchases above Rs. 5000/-, 20% discount for purchases above Rs. 10,000/- and 30% discount for purchases above Rs. 20,000/-, such discounts are shown on the invoice itself. (ii) Some suppliers also offer periodic / year ending discounts to their stockists, etc. For example- Get additional discount of if you purchase 10000 pieces in a year, get additional discount of 2% if you purchase 15000 pieces in a year. Such discounts are established in terms of an agreement entered into at or before the time of supply though not shown on the invoice as the actual quantum of such discounts gets determined after the supply has been effected and generally at the year end. In commercial parlance, such discounts are colloquially referred to as "volume discounts". Such discounts are passed on by the supplier through credit notes. (iii) It is clarified that discounts offered by [he suppliers to customers (including staggered discount under "Buy more, save more" scheme and post supply volume discounts established before or at the time of supply) shall be excluded to determine the value of supply provided they satisfy the par....
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....ty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation. -For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy: 3) The value of the supply shall not include any discount which is given (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and (b) after the supply has been effected, if (i) such discount is established in terms of an agreement entered into at or. before the time of such supply and specifically linked to relevant invoices, and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. 12) According to section 15(3)(a) of CGST Act if discount is displayed on face of invoice it has to be excluded from value of goods. The applicant is providing discount on sale of extra quantity at the time of sale of cigarettes packs. Therefore discount is allowed to be deduct....
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.... 15%)] and the duty @10% on this consignment shall be paid by supplier "S" that will be amounting to be Rs. 115/-. Now to avail the benefit of the Section 15(3) of the CGST Act, 2017 the recipient of the supply "R" would take credit of the full amount of the duty paid by him that is Rs. 115/- however, the recipient "R" Shall have to reverse the credit of Rs. 15/- attributable to the discounted amount of Rs. 150/- as indicated clearly in the invoice in the instant case. Para 14 (i): Yes, as discussed above. Para 14 (ii): As discussed above in reply to the Para 13. Para 14 (iii): No, it is not exempt supply (as discussed above). 04. HEARING Preliminary Hearing in the matter was held on 06.03.2019. Sh. Parannan Namboodri, Advocate and Sh. Niketan Dhumal, Advocate appeared and requested for admission of application as per details in their application. Jurisdictional officer was absent. The application was admitted and called for final hearing on 16.04.2019. Sh. Vishal Sheth, C.A., appeared made oral and written submissions. Jurisdictional Officer Sh. B. S. Mule, Supdt., Div.-III, Range-II, CGST & CX, Mumbai West, also appeared and made written submissions. 05. OBSERVAT....
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....d the said supplies same will be made for the price of 1000 packs. Here they have stated will be a case of staggered discounts to distributors so that they buy more and get more and in the process increase or sales and thereby growth. The Applicant has also submitted illustrations in their submissions which are mentioned above. The jurisdictional office has cited the provisions of Section 15(3) of the CGST Act and submitted that a careful reading of the said Section indicates that the benefit of discount in value is available only to the recipient of the supply and not to the supplier i.e. the applicant in the instant case. The jurisdictional office has further submitted that the condition prescribed for availing the benefit of the value discount is also available only to the recipient of the supply and not to the supplier i.e. the applicant in the instant case. After perusing both the submissions we find that whereas the applicant is desirous of giving a quantity discount, the jurisdictional office is speaking about value discount. However we find that after the subject application was made by the applicant, a new development has taken place by way of issue of a Circular No. 92/....
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....t be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration. However, where the activity of distribution of gifts or free samples falls within the scope of "supply" on account of the provisions contained in Schedule I of the said Act, the supplier would be eligible to avail of the ITC. B. Buy one get one free offer: i. Sometimes, companies announce offers like 'Buy One, Get One free " For example," buy one soap and get one soap free "or "Get one tooth brush free along with the purchase of tooth paste As per sub-clause (a) of sub-section (1) of section 7 of the said Act, the goods or services which are supplied free of cost (without any consideration) shall not be treated as "supply" under GST (except in case of activities mentioned in Schedule I of the said Act). It may appear at first glance that in case of offers like "Buy One, Get One Free one item is being "supplied free of cost "without any consideration. In fact, it is not an individual supply of fee goods but a case of two or more individual supplies where a single price is being charged for the e....
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....or are offered after the supply is already over. For example, M/s A supplies 10000 packets of biscuits to M/s B at Rs. 10/- per packet. Afterwards M/s A re-values it at Rs. 9/- per packet. Subsequently, M/s A issues credit note to M/s B for Rs. 1/- per packet. ii. The provisions of sub-section (1) of section 34 of the said Act provides as under: "Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed." iii. Representations have been received from the trade and industry that whether credit notes(s) under sub-section (1) of section 34 of the said Act can be issued in such cases even if the conditions laid down in clause (b) of su....
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....t be applicable in the subject case where value discounts are not contemplated. The situation mentioned at Para(D) of the above said Circular mentions situations where discounts are not known at the time of supply or where discounts are offered after the supply is over. In the subject case the discounts are known well before the supply is effected 05. In view of the extensive deliberations as held hereinabove, we pass an order as follows : ORDER (Under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-121/2018-19/B-52 Mumbai, dt. 04-05-2019 For reasons as discussed in the body of the order, the questions are answered thus- The Applicant is seller of Cigarettes, and intends to offer extra quantity of Cigarettes (quantity discount) in addition to normal quantity against same consideration, as a taxable supply to its Distributors from their Depot. As per new marketing strategy devised by the Applicant to promote its brands and also to increase its turnover the Applicant proposes to distribute/promote some of their brands/products in the market, thru their Distributors. The price range of these cigarette....