AI Drafter 
TaxTMI 
TaxTMI 
2023 (9) TMI 126
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.... respectively) and is engaged in manufacturing of cement. 3. The applicant has sought advance ruling in respect of the following question:- 1. Whether the applicant's obligation to issue gold coins and white goods to the dealers upon they achieving the stipulated lifting of the material/ purchase target during the scheme period would be regarded as "goods disposed of by way of gift" and Input Tax Credit ("ITC") on the same would be restricted as provided under the Section 17(5)(h) of the CGST Act, 2017? 2. Whether the applicant's obligation to issue gold coins and white goods to the dealers upon they achieving the stipulated lifting of the material/ purchase target during the scheme period would be regarded as a "permanent transfer or disposal of business assets where ITC has been availed on such assets" and would be treated as a supply even if made without consideration and be subjected to GST under SI. No. 1 of the Schedule-I to the CGST Act, 2017? 3. Whether the applicant's obligation to issue gold coins and white goods to the dealers upon they achieving the stipulated lifting of the material/ purchase target during the scheme period would be regard....
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....t. b. On Strongcrete volume Rs. 5 per Bag will be disbursed in the form of Gold. c. Disbursement shall be made in the form of credit notes on Quarterly/Half Yearly / Yearly 5.8 As per the "Monthly/Quarterly Quantity Discount Scheme", in case any dealer from Karnataka purchases 500 MT of OPC from the Company, a discount worth Rs. 13/- per bag shall be credited to his account. Higher the cement quantity purchased by the dealer, higher will be the discount earned by dealer resulting into higher eligibility of gold coins. At the end of the quarter, the Company purchases gold coins worth the total discount credited to the account of the dealer and distributes the said gold coins to the dealer as per the agreed terms of the promotional scheme. The invoice for the said gold coins is raised in the name of the Company and accordingly, ITC of the GST paid on the gold coins is claimed by the Company. 5.9 In case of "Monthly/Quarterly Quantity Discount Scheme" and "Dealer White Goods Scheme" the benefit provided to the dealer is determined based on the amount credited to the account of the dealer which in turn is based on the quantity and the grade of cement purchased b....
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....h) of the Act, "Input tax credit shall not be available in respect of the following, namely: goods lost, Stolen, destroyed, written off or disposed of by way of gift of free samples". As per the said provision, credit is not available in respect of goods which are given as gifts and free samples. 6.1.4 As mentioned above, in case of gold coins and white goods distributed to the dealers, the same are distributed based on the quantity lifted by the dealers and the amount of discount the said dealer is eligible for. This ensures that the dealers are motivated to purchase higher quantity of cement in order to be eligible for the discount and in turn gold coins and white goods. This would result in the enhancement of the sales of the company. 6.1.5 The applicant states that as per the provisions of the Act, every registered person is 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. 6.1.6 The applicant submits that in the instant case, the gold coins and white goods are provided to the dealers in furtherance of business so as to promote and enhance th....
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....ious promotional schemes including distributing goods for brand promotion. 3. Therefore, based on the above submissions, the applicant states that they shall be allowed to avail the ITC on gold coins and white goods distributed to the dealers as the same are incurred as in the course or furtherance of business and they cannot be regarded as 'gifts' for the reasons mentioned above. 6.3 Gold coins and white goods distributed as part of the promotion schemes cannot be regarded as permanent transfer or disposal of business asset where ITC has been availed on such assets 6.3.1 The SI. No. 1 of the Schedule-I of the Act states that "Permanent transfer or disposal of business assets where input tax credit has been availed on such assets" shall be regarded as supply even if made without a consideration. Thus, it is imperative to understand the term "Business Assets" in order to conclude whether the gold coins and white goods issued to dealers would fall under the said entry. 6.3.2 The term "assets" is defined in various Dictionaries as below:- Black" Law Dictionary, Ninth Edition - "The entries on a balance sheet showing the items of property owned, including cas....
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....y considered as assets. Various courts have consistently held that the meaning of a term not defined under the statute, can be derived from the meaning assigned to it in trade and industry. In this regard, reliance is placed on the following decisions:- (a) Dunlop India v. UOl, 7 983 (13) ELT 1566 (SC) (b) Pharm Aromatic Chemicals, 1997 (95) E.L.T. 203 (Bom.) (c) Himani Ltd., 2011 (263) E.L.T. 335 (All.) (d) Vicco Laboratories, 2005 (179) E.L.T. 17 (S.C.) (e) Bella Premier Happy Hygiene Care Pvt. Ltd., 2018(17) G.S.T.L. 603 (KAR) 6.3.7 In view of the above, an asset in common parlance and trade understanding are considered as items of the balance sheet. 6.3.8 Further, Schedule-II of the Act provides the list of activities or transactions to be treated as supply of goods or supply of services. Entry (4) of the said schedule pertains to the "transfer of business assets". Clause (a) of entry (4) provides that "where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to from part of those assets, such transfer or disposal is a s....
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....trict the scope of said entry to the business asset which is an item of balance sheet. Therefore, it is abundantly clear that the intention of the legislature is to apply the entry 1 of the schedule I only to the business assets which are item of the balance sheet and not to all the goods. 6.3.15 As discussed above, the term "assets" also includes inventory of the business. Therefore, even if it is assumed that the term "Business asset" used in Schedule-I also includes the inventory of the company then in such case any goods issued to any unrelated person without consideration would be deemed supply under SI. No. 1 of the Schedule-I. In such a case, the main crux of term supply for a consideration under Section 7 of the Act would get defeated thereby rendering Section 7 redundant. This would lead to a situation where anything and everything issued whether for a consideration or not would be subjected to GST under SI. No. 1 of the Schedule-I of the Act, which is not the intention of the GST law. 6.3.16 Based on the above submissions, gold coins and white goods distributed cannot be regarded as "Business Assets" and therefore the distribution of gold coins and white goods to de....
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....f goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; 6.4.4 Section 2(31) of the Act as above provides "consideration" an inclusive definition as any payment (in money or otherwise) or monetary value of any act or forbearance in respect of, in response to, or for the inducement of, the supply. It is submitted that "supply for consideration" as envisaged under Section 7 of the Ac....
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....hly Quantity Discount (QD) Volume/ Slabs (MT/Month) Discount (Rs./Bag) North Karnataka & South Karnataka 60 to 100 9.00 101 to 200 10.00 201 to 250 11.00 251 to 300 12.00 300 13.00 Further, the additional guidelines in respect of the Monthly QD Scheme are:- a. Applicable on all products i.e. Strongcrete, PPC & OPC clubber together b. The disbursement shall be made in the form of Gold coin on quarterly basis. Quarterly Quantity Discount (QD): Products OPC / PPC / Stroncrete Quaterly Quantity Discount (QD) Volume/ Slabs (MT/Month) Discount (Rs./Bag) North Karnataka & South Karnataka 60 to 300 3.50 > 300 to 750 4.00 > 750 5.00 Quaterly Quantity Discount (QD) Product Discount (Rs./Bag) North Karnataka & South Karnataka PPC 4.00 The additional guidelines in respect of the quarterly QD Scheme are,- a. Dealers with >90 days outstanding shall not be eligible for this discount b. On Strongcrete volume Rs. 5 per bag will be disbursed in the form of Gold c. Disbursement shall be ....
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....gold coins to the dealer as per the agreed terms of the promotional scheme. The invoice for the said gold coins is raised in the name of the company and accordingly, the ITC of the GST paid on the gold coins is claimed by the Company. The applicant states that in case of "Monthly/ Quarterly Quantity Discount Scheme" and "Dealer White Goods Scheme", the benefit provided to the dealer is determined based on the amount credited to the account of the dealer which in turn is based on the quantity and the grade of cement purchased by such dealer. Subsequently, to pass on the benefit of such credit lying in the dealer's account, the company distributes gold coins and white goods to such dealers instead of adjusting it against the payment to be received from such dealers or issuing them credit notes. 11. Regarding the second question, the applicant has stated that the distribution of gold coins and white goods cannot be regarded as permanent transfer of disposal of business assets as the said restriction is in respect of only those assets which are capitalized in the books of accounts and not in respect of revenue expenditure. Further, he states that the said distribution cannot be rega....
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.... the applicant, is an inducement from the dealer or in other words non-monetary consideration paid by the dealers for the supply of gold / white goods by the applicant. Further since the transfer of gold / white goods from applicant to the dealers is made for a consideration, it is covered in the definition of 'supply', more so when the definition of supply is an inclusive one. Even, if the same is not covered under the term consideration, the goods are permanently transferred to the dealers and input tax credit has been availed on such goods. The term "assets" would definitely include the "inventory" and since these goods are procured in the course of business, would be covered under the scope of "business assets". Nowhere in the Schedule I it is stated that these business assets should be capitalized. Hence as per entry 1 of the Schedule I, "permanent transfer or disposal of business assets where input tax credit has been availed on such assets" would cover the activity of distribution of white goods or gold as incentive and hence would be treated as a supply of such goods as per clause (c) of Section 7(1) of the CGST Act. 13. Coming to the first question as to whether the ....
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.... of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39....." From the above, subject to the charging of tax in the invoices issued by the suppliers of gold coins and white goods, the same is eligible to be claimed as input tax credit and the same has been claimed by the applicant. 14. The applicant is issuing these gold coins and white goods so procured as incentives as per the agreement reached between himself and the recipients. It is only issued subject to the fulfilment of certain conditions and stipulations. Gift is something which is given without any conditions and stipulations and hence the same cannot be covered under the scope of "gift". Section 17(5) (h) states that input tax credit is not available on "goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples". Since the goods are not given as gifts this clause is not applicable to the present transaction. In view of the above, the input tax credit so claimed under section 16 d....