TaxTMI 
TaxTMI 
2021 (10) TMI 1117
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....il Nadu- 635126 (hereinafter called the 'Applicant') is registered under the GST Vide GSTIN 33AACCG0136G1Z8. They have sought Advance Ruling on the following question:- Whether the GST paid on inputs/input services procured by the applicant to implement the promotional scheme under the name 'Buy n Fly' is eligible for Input Tax Credit under the GST law in terms of Section 16 read with Section 17 of the CGST Act, 2017 and TNGST Act, 2017? The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGS1 Rules 2017. 2.1 The Applicant has stated that they are engaged in the business of manufacture and supply of ghee and other products. They have their factory premises at Tamil Nadu and Karnataka having separate GST registration in both the States. The product groups of the applicant are classified into ghee, masalas, instant mixes and sweets. The products supplied by them are taxable under the Act and none of the products are either "Exempted" or "Nil rated". They sell their products through var....
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.... 3. The rewards/rewards specified under the scheme do not accrue to the retailers automatically and/or they cannot claim the same as a matter of right under the scheme. 4. They cannot participate in any other sales promotion scheme(s)/marketing scheme(s) of any other third party/vendor during the tenure of the 'Buy n Fly' scheme i.e. 8th April to 8th July 2019. The terms and conditions of the 'Buy n Fly' scheme as contained in the brochure are as follows:- • The scheme is valid from 8lh April 2019 to 8lh July 2019 • The total purchases have to be of minimum slab or above during the period. • The rewards cannot be substituted with money. • The bills cannot be tweaked or altered. • The bills should have seal & signature of the retailer with contact number • The claims have to be submitted on or before 20th of July 2019. • The scheme is applicable for Masalas, Instant Mixes, Sweets, Town bus, snacks only (CTC is excluded) 50% bill value should be of masalas. • Any disputes are subjected to Hosur (Tamil Nadu) jurisdiction only. As per the scheme the ....
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....ble reward articles ¯ Handing over reward to eligible customer outlets. 2.3 On interpretation of law, the applicant has stated that their products are taxable at 12%, 18% and 5% under the GST law (the Act). None of the company's products are 'exempted' or 'nil-rated.' To augment its sales, the company had launched a sales promotion scheme titled 'Buy n Fly' wherein based on the quantity and value of products purchased by the retailers, they are awarded certain rewards as per the scheme. They have submitted that they are eligible to claim input tax credit in respect of procurement of inputs and inputs services, being Trip to Dubai, Gold voucher, Television and Air-cooler. It is submitted that the' applicant procures these goods and services in the course of business and it has direct nexus with the business carried on by the company. It is submitted that marketing and business expansion is an indispensable activity of every company's operations and 'Buy n Fly' scheme is a sales promotion scheme which was launched to promote the sales of GRB brand Instant mix, Masalas, ready to eat sweets and snacks. They have stated that the ....
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....ther, in terms of the provisions of CGST Act, 2017 the inward supply should not get covered u/s 17(5) which deals with blocked credits under the Act. The applicant has stated that Clause (h) of the said sub section draws attention under the present case which specifies that credit shall not be eligible in case of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Considering this context, they have submitted that rewards such as Dubai Trip voucher, Gold voucher, TV and Air-cooler handed over to eligible retail outlets shall not fall under clause (h). Clause (h) deals with goods disposed of by way of gift' which cannot be equated to 'rewards'. Since, the term 'Gift' has not been defined under the CGST Act, 2017 they have referred to other enactments and judicial pronouncements in order to ascertain the meaning of the term gift'. The term Gift' under Gift Tax Act, 1958 was defined as,- • '(xii) gift means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion o....
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....ined under the GST law includes any activity or transaction which may be connected, or incidental or ancillary to the trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity. There is neither a requirement of continuity nor frequency of such activities or transactions for them to be regarded as 'business'. The law poses no restriction that the goods must be used on the shop floor, or that they must be supplied as such/ as part of other goods/ services. It would be sufficient if the goods are used in the course of business, of for furthering the business. The term 'course of business' is one that can be stretched beyond the boundaries consolidating activities that have direct nexus to outward supply. What is usually done in the ordinary routine of a business by its management is said to be done in the "course of business". "Furtherance of business" is a new term, and an entirely new concept, that has been introduced in GST. Additionally, there is no other condition attached to the term "input", especially in relation to the outward supply. Further, the law provides a flexibility for this purpose by inserting the words "or in....
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....such as Electricity & Water; Consumables for manufacturing ; Repairs and Maintenance for Plant and Machinery and allied equipments) ; Packaging Cost (both Inner and Outer Packing); Transportation Expenses ; Storage and Related Costs ; Advertisement and Sales Promotion Cost; Head Office and Regional Office Overheads ; Distributor Margin ; Profit Margin.; all these elements form the basis of fixation of the MRP. From the above it is evident that the price of the product has an clement of the Advertisement and Sales Promotion Cost included and hence the consideration for the product on which GST is discharged has this element inbuilt. ii. the objective behind running any Sales Promotion Campaign are as under: Keeping Sales Volume at the same levels or achieve incremental volumes ; Pushing sales volume at the expense of the Competitors by encouraging dealers to move their product's ; Giving Customers a taste of their Products which helps to sustain or increase Sales Volumes and Values. iii. The applicant has submitted that the Sales Promotion Expenses incurred are pursuant to a contractual obligation. The consideration which is paid for the product includ....
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....leted and the ruling would be made by the Advance Ruling Authority before 20th October to enable them to take a decision on whether to avail or not avail the related Input Tax Credit on these supplies as the cut-off date for credit availment was 20th October 2020. In the absence of any progress on the matter they availed the credit but have not utilized the same against the payment of Output Tax liability and the same is carried forward in Input Tax Credit Ledger. Further, in terms of Section 97 of the Central Goods and Services Tax Act and its corresponding provision under the State Goods and Services Tax Act the Advance Ruling authority is authorized to deal with questions relating to admissibility of input tax credit of tax paid or deemed to have been paid. The term used is admissibility of input tax credit of tax paid or deemed to have been paid and there is no specific exclusion relating to input tax credit of tax paid or availed. Hence, they have requested the authority to take cognizance of the above fact relating to the grounds on which the input tax credit was availed and their submissions. 3.4 The applicant was addressed vide letter dated 19.03.2021 to submit details o....
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....t of their manufactured products includes the sales promotional expenses. 4.1 The State Jurisdictional authority who has the administrative jurisdiction over the applicant vide his letter ROC.617/2020 dated 05.02.2021, has submitted the following remarks:- • As per Section 17(5)h of TNGST Act 2017, input tax credit shall not be available in respect of goods lost, stolen, destroyed or written off or disposed off by way of gift or free samples. Hence, as per the act the free gifts or rewards given without consideration even though they are given for sales promotion do not qualify as inputs, since no GST is paid on its disposal. Hence, the applicant is not eligible for availing ITC of the tax paid on purchase of those products. • As per the CBIC Circular No.92/11/2019 dated 07.03.2019, only certain sales promotional schemes are eligible for ITC and it is clarified in the circular that ITC shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts/free samples distributed without any consideration. Since, the offers an' given voluntarily by the applicant on fulfillment of c....
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....he inputs/input services on which ruling has been sought. When questioned on the fact of such availing, they submitted that the application for ruling was filed online on 12.05.2020 and physical copy of such application was filed with the registry on 19.10.2020. Credit was availed in order to avoid the same lapsing due to limitation of time for availment as the cut off date was 20.10.2020 and that the credit so availed has been lying utilized so far in their ledger. The State Jurisdictional Officer, in his verification report dated 13.08.2021 has stated that the applicant has filed the monthly return, GSTR 3B on 23.10.2020 and the applicant has availed credit for the goods purchased for the promotional scheme. The applicant has filed the application seeking the ruling on 19.10.2020 and as on the date of filing the application, there is no pending proceedings on the issue raised by the applicant (as reported by the jurisdictional authorities). Therefore, the application is found admissible under Section 97(2)(d) of the CGST Act 2017. 7.1 From the submissions, it is seen that, the applicant is engaged in the business of manufacture and supply of ghee and other products. They have ....
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....ces used in furtherance of business; that the scheme was a contractual obligation as the details of the scheme was circulated before launch; the price paid by the dealers/distributors for procurement of their products included the component of sales promotion expenses and therefore is the consideration for the rewards of the scheme procured by them on which ITC has been claimed; that the promotional materials are not gifts and are not covered under S.17(5)(h) of the GST Act; that there is no difference in MRP of their product pro scheme and there was an incremental supplies of almost 24% during the period of the scheme; that therefore the ITC is available to them on such inputs/ input services. 7.3 The eligibility to credit are governed by the provisions of Section 16 and Section 17 of the CGST Act. The relevant provisions are examined as under:- 16. (1) Every registered person shall, subject to such conditions and rest notions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business a....
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....nal Consumption' is not defined in the GST Law. The legal meaning of 'Personal' is 'pertaining to the person' and 'Consumption' is defined as The word "Consumption" cannot be understood in the limited sense of eating but in the wider sense of using--C.Govindarajulu Naidu V. State of Madras AIR 1953 Mad 116'. The goods/services procured for disbursement in the scheme are Personal Air Coolers, LED TV, Dubai Trip for the persons and Gold Vouchers. These are distributed to the retailers for their personal consumption. The claim that the cost of these goods/services are accounted under sales promotion account, the expenses under which are considered to arrive at the cost of the product is immaterial and the argument docs not hold, in as much as the credit of taxes paid on the goods/services for personal consumption is explicitly restricted. The fact of who pays for the goods and services here is irrelevant to the usage of the said goods and services. The goods and services are used by the retailers and hence are for personal consumption and the applicant is ineligible to take input tax credit on the inward supply of these goods/services. 7.6 Further, a....