AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 472
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....ries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- under SGST and Rs. 5,000/- under CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided nor are pending before any authority under any provisions of the CGST/TGST Act' 2017. The application is, therefore, admitted after examining it and the records called for and after hearing the applicant as per section 98(2) of TGST Act' 2017. 4. BRIEF FACTS OF THE CASE: 4.1 The applicant M/s. Orient Cements Limited is into the Manufacturing and Sales of Portland Cements and has submitted this business details in the context of the application as follows: 1. That the Company is engaged in the business of manufacture of Ordinary Portland Cement ('OPC') & Pozzolona Portland Cement (PPC). The Company in its regular course of business incurs various marketing and distribution expenses. The said expenses are incurred with a view to promote their brand/products and enhance its sales. 2. That the channel of distribution plays a pivotal role in achieving the m....
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....ded 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 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. 9. That the Applicant believes that the restriction laid down in Section 17(5)(h) of the Act is applicable only in respect of goods disposed of by way of 'gifts'. In the instant case, the gold coins and white goods distributed to the dealers cannot be regarded as 'gifts' on the dealer is eligible for the gold coins and white goods only to the extent of amount lying as credit to his account and is subjected to the satisfaction of the terms and conditions of the scheme 10. That the applicant also believes that the distribution of gold coins and white goods cannot be regarded as permanent transfer or disposal of business assets as the said restriction in respect of only those assets which are capitalized in the books of accounts and not....
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.... of his business and the said amount shall be credited to the electronic credit ledger of such person". Thus, they contended that credit is available for input tax paid on goods which are used for furtherance of business. 3. They further submitted that as per Section 1715)(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. 4. They submitted that, 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. 5. They submitted that as per the provisions of the Act as highlighted above, every registered person is entitle to take credit of input tax charged on any supply of goods ....
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....hakuntala & Ors. Vs. The State of Haryana reported in 1979 3 (SCC) 226 is of much avail. The relevant paragraph of the said judgment is reproduced herein below for ready reference: "It is therefore one of the essential requirements of a gift that it should be made by the donor "without consideration". Per word "consideration has not been defined in the Transfer of Property Act, but we lame un doubt that it has been used in that Act in the same sense as in the Indian Contract Act and excludes natural love and affection. If it were to be otherwise, a transfer would really amount to a safe within the meaning of section 54 of the Transfer of Property Act, or to an exchange within the meaning of section 118 for each party will have the rights and be subject to the liabilities of a seller as to what he gives and have the rights and he subject to the liabilities of a buyer as to that which he takes. It is not necessary for us to examine the other modes of transfer, for they have no bearing on the nature of the controversy before us. It would thus appear that it is of the essence of 'at gift as defined in the Transfer of Property Act that it should be without "consideration" of the n....
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....he activity, conducted in a regular manner based on sound and recognized business principles? d. is the activity, predominantly concerned with the making of taxable supply for consideration put motive? ix. That, if promotional items are considered as gift and the ITC on the same is disallowed, tris will have a huge impact across the businesses because in order to promote sales or to create goodwill, the companies carry out various promotional schemes including distributing goods for brand promotion. x. They submitted that based on the above submissions, the applicant 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. 4.5 The applicant further contended that a contractual obligation is created between the applicant and the dealer which would enable either party to take recourse to a civil suit or action for specific performance of contract on failure to adhere to the terms and conditions. i. That the applicant wishes to submit that the Company and the dealer enter into a dealership agreement which ....
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....et showing the items of property owned, including cash, inventory, equipment, real estate, accounts receivable, and goodwill." Online Merriam Webster Dictionary - "the items on a balance sheet showing the book value of property owned." iii. That the General instructions for preparation of balance sheet and statement of profit and loss of a company are provided under Schedule III of the Companies Act, 2013. Assets therein are divided into non-current and current assets as follows: "Non-current assets (1) (a) Fixed assets (1) Tangible assets (1) Intangible assets (iii) Capital work-in-progress (io) Intangible assets under development (b) Non-current investments (c) Deferred tax assets (net) (d) Long-term loans and advances (e) Other non-current assets (2) Current assets (a) Current investments (b) inventories (e) Trade receivables (d) Cash and cash equivalents (e) Short-term loans and advances Other current assets." iv. That as per Note 1 to Schedule III of the Companies Act, 2013, "an asset shall be classified as current asset if it satisfied any of the following criteria:- a. it is expected to be realised in, or is intended for sale or cons....
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....as supply of goods and not all goods for the purpose of clause (a) of entry 4 of Schedule II of the Act x. That the term business asset mentioned under the entry 1 of Schedule-I shall be read with the clause (a) of entry 4 of schedule II, it is evident that the said entry is applicable only in case where goods which are part of the balance sheet are permanently transferred or disposed of. xii. That the entry (1) of schedule I specifically uses the term "business asset" whereas the entry (2) of the Schedule states that "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 is considered to be deemed supplies. Entry 3 provides that "supply of goods" between principal and agent is considered to be deemed supplies and entry 4 of the aforesaid schedule covers import of services from a related person. Therefore, it is evident that entry 2, 3 & 4 uses the term "goods or services". xiii. The term "goods" as defined under section 2(52) of the Act provides that "goods" means every kind of movable property. The said definition is reproduced below: "(5) "goods" means every ....
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....ealers as part of the promotional scheme cannot be regarded as supply under section of the act i. That with regards to gold coins and white goods issued to dealers being treated as a supply under Section 7 of the Act, it is pertinent to analyse Section 7 of the Act. ii. That it is evident from the above definition that a transaction can be said to be a supply only if the same has been made or agreed to be made for consideration. Therefore, in the absence of consideration, then supply cannot be said to have been made. iii. That the term "consideration" is defined under section 2(31) of the Act. The same is reproduced below: iv. That the "consideration" in relation to the supply of 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 th....
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....during the scheme period would be not regarded as a supply under Section 7 of the Act; 4.2 Company Background: Applicant M/s. Orient Cement Limited, Established in 1979, Orient Cement was formerly, a part of Orient Paper & Industries. It was demerged in the year 2012 and since then, it has emerged as one of the fastest growing and leading cement manufacturers in India. Orient Cement began cement production in the year 1982 at Devapur in Adilabad District, Telangana. In 1997, a split-grinding unit was added at Nashirabad in Jalgaon, Maharashtra. In 2015, Orient Cement started commercial production at its integrated cement plant located at Chittapur, Gulbarga, Karnataka. With a total capacity of 8 MTPA, they serve Maharashtra, Telangana, Andhra Pradesh, Karnataka and parts of Madhya Pradesh, Tamil Nadu, Kerala, Gujarat and Chhattisgarh. The product mix includes Pozzolana Portland Cement (PPC) & Ordinary Portland Cement (OPC) marketed under the brand name of Birla.A1 - Birla.A1 Premium Cement and Birla. A1 StrongCret. 5. QUESTIONS RAISED: 1. Whether the applicant's obligation to issue gold coins and white goods to the dealers / customers upon they achieving the stipulated li....
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.... ITC on the purchase made by the applicant under section 17(5) (h) of the CGST Act. 2. To support his argument that transfer of goods by the applicant to his dealer is not a gift, the applicant submits that there is a contractual obligation on his part to transfer the incentive Goods to his dealer once the threshold sales are reached by the dealer and that if such transfer of incentive Goods does not take place even after the set target is reached by the dealer, then the dealer can sue the applicant in a civil court for non performance of the contract. 3. According to the applicant the transfer of Gold Coins and White Goods is not permanent transfer or disposable of permanent asset. Therefore it does not fall under Schedule-1 to the CGST Act and hence cannot be taxed as such under the said Schedule. 4. According to the applicant, the transfer of Gold Coins and White Goods is not supply has described under Section 7 of the Act because there is no consideration paid by the recipient of the Goods. Thus, in sum and substance, the argument made by the applicant is that the transfer of goods by him to his dealers is neither a supply under Section 7 of the CGST Act and therefore it....
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....son to take a certain course of action'. e) Seen in light of the above fundamental statutory position the transaction in the case of the applicant is one of supply of goods to his dealers in exchange for consideration. The Consideration is the monitory value of the "act" of attaining a level of business indicted in the incentive scheme by the applicant. The applicant is inducing his dealers / stockiest to attain a particular level of business as a consideration for the goods to be supplied by him. f) Thus, the applicant is making supply of white goods and gold to his dealers or stockiest in return for the dealers or stockiest attaining a threshold of sales indicated in the scheme and therefore, the value of white goods and gold supplied by him are for the 'act' of achieving this threshold and therefore taxable in his hands. The value of the goods supply is determined under Section 15 of the GST Act read with Rule 30 of the CGST Rules. 8. In view of the foregoing, we rule as follows: In view of the above discussion, the questions raised by the applicant are clarified as below: Questions Ruling 1. Whether the applicant's obligation to issue gold coins and white goods to ....