AI Drafter 
TaxTMI 
TaxTMI 
2022 (2) TMI 825
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....ctured by the applicant's factory located in other state and are transferred to the Applicant on stock transfer basis on payment of appropriate GST and Compensation Cess for sale to their distributors. The GST rate applicable for products falling under HSN-2402 is 28% alongwith applicable compensation cess. (4) The Applicant has recently entered into the domestic market and wants to introduce new business module in order to carve out a niche for itself in view of the competition in the market on account of earlier established firms/companies and in order to establish their business. (5) That with a view to grow in the present prevailing scenario and in order to increase its market presence, it has introduced a new sales promotion strategy by way of which the Applicant would be supplying extra packs of cigarettes along with their regular supply quantity to their distributors without receiving any additional consideration and/or additional payment for the extra supply. That as the Applicant would not be receiving any additional consideration for the extra packs which would be so supplied, they would be discharging GST along with the applicable compensation cess ....
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....cks of cigarettes but he would be required to pay for only 100 packs of cigarettes. That even though the Applicant would be making two individual supplies, i.e. packs of cigarettes of 100 packs and 30 packs but the said supply would be made for the price of 100 packs. That in this scheme a distributor who buys 200 packs of cigarettes would get an additional 60 packs and the entire supply would be at the cost of 200 packs and so on and so forth. That therefore, whereas the Applicant would be making two individual supplies and a single price would be charged for the entire supply. That therefore, the Applicant would be supplied 130 packs for the price of 100 packs. 3. The applicant has sought advance ruling on the following questions- (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 levy of GST (iii) Whether extra packs of cigarettes would be considered as exempt supplies or free samples and hence, attracts the provisions of Section 17(2) of the UPGST Act, 2017 read with Rule 42 of the UPGST Rules, 2017, or clause....
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.... sole distributor and in the present case the distributor of the Applicant is not the sole distributor. (ix) That in the present case the Applicant would be supplying the additional quantity of cigarettes to the distributor but without any proportional increase in the value of goods. Hence, the value attributable to such additional quantity of cigarettes can itself be considered as supply in terms of the provisions of sub-section (3) of Section 15 of the UPGST Act, 2017. (x) It is submitted that in the proposed transaction, the additional quantity of cigarettes cannot be considered to be free supplies but against a consideration mentioned in the invoice on which GST alongwith applicable compensation cess would be discharged, such supply of additional quantity cannot be included in the category of exempted supplies or supply of free samples. Consequently, in respect of such supplies the mischief under sub-section (2) to Section 17 of the UPGST Act, 2017 or of clause (h) of sub-section (5) of Section 17 of the UPGST Act, 2017 will not be attracted. (xi) The Circular No. 92/11/2019-GST dated 07.03.2019 has sought to clarify the issues with respect to tax treatment of sales pr....
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....cks would be supplying extra quantity of 30 packs. That even though it would not be an individual supplier of free goods i.e. 30 packs of cigarettes being without any cost but actually a single price would be charged for the two or more individual supplies. That in other words the price of 100 packs of cigarettes would be charged even though the supply would be that of 130 packs. That further as specifically clarified in Scheme-B(iii), the Applicant would also be eligible for availement of ITC goods for the inputs, input services and capital goods. (xiv) That further in similar facts and circumstances this Hon'ble Authority for Advance Ruling, Maharashtra in the case of In Re: M/s. Golden Tobacco Ltd., reported as 2019 (27) GSTL 61 (AAR-GST), has categorically held as under: "7. 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....
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....o.- V(1)Misc/R-VII/Agra/07/2021/315 dated 25.08.2021 submitted as under- (a) The applicant has sought advance ruling under Uttar Pradesh Goods and Service Tax Act, 2017 and accordingly it should be dealt by State GST authorities. (b) Matter relates to supply of 30 additional pack of cigarettes free with each 100 pack of cigarettes to their distributors as a promotional scheme. The tax payment will be made on 100 pack of cigarettes and the distributor will be free to utilize this benefit as per their own. So, this is a question of valuation, taxability and availability of ITC on such free supply of cigarette which is very well covered under Section 15 & 17 of CGST Act, 2017. (c) The issue has been further clarified by the CBIC vide Circular No. 92/11/2019-GST dated 07.03.2019 and 105/24/2019-GST dated 28.06.2019, so there seems no need to issue advance ruling in the matter. (d) No any proceedings on the question raised in application is yet pending or decided by this office. 7. The applicant was granted a personal hearing on 28.08.2021, which was attended by Shri Priyadarshi Manish, Advocate & Authorized representative through video conferencin....
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.....2019 and 105/24/2019-GST dated 28.06.2019. 12. Section 15 of the CGST Act, 2017 deals with valuation of taxable supply. The relevant portion of the same is reproduced below- 15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include---- ... ... ... .... (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 13. Circular No. 92/11/201....
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....vices and capital goods used in relation to supply of goods or services or both as part of such offers. C. Discounts including 'Buy more, save more' offers: ... ... ... ... ... ... ... ...... D. Secondary Discounts ... ... ... ... ... ... ... ...... ... ... ... ... ... ... ... ...... 14. The Para 2 (B) of the above said Circular is clearly applicable to the facts of the subject application. As the name itself says it all, buy one get one free means if the customer buys one product, one more of the same product will be given for free. Any supply made free of cost (i.e., without consideration) will not attract GST. However, under the 'buy one get one free' offer, two products are given at the price of one. In nut-shell, there is a supply of two products at the price of one. Hence in such a situation, GST liability will be analyzed as under- • The supply will be determined in terms of composite supply or mixed supply; • GST rate will be determined as per the provisions of section 8 of the CGST Act. Now, coming to the availability of ITC, the referred circular clarifies that ITC of inputs/ input service....