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2019 (4) TMI 1943 - AUTHORITY FOR ADVANCE RULING, HARYANAGift - Consideration - certain customized lifestyle goods procured by BMW India either from a third party local supplier or imported from outside India for supply of goods during promotion/marketing events organized by the Company - whether goods will qualify as used in the course or furtherance of business in terms of the provisions of the Central Goods and Services Tax Act, 2017? - input tax credit - goods supplied under the marketing events - Section 17 (5) of the CGST Act - HELD THAT:- Section 16 (1) of the CGST Act provides that “Every registered person shall, subject to such conditions and restrictions 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 and the said amount shall be credited to the electronic credit ledger of such person”. The applicant has drawn a clear distinction between goods given as gifts and goods given on free of cost basis. The applicant also draws a sharp contrast between gift which is transferred voluntarily and not as a result of contractual obligations and free of cost (FoC) supplies which are intended to strengthen the customer base. The applicant further holds that these free of cost supplies are made with an intention to receive consideration (in case or in kind) and has accordingly held that a clear distinction should be drawn between a gift and free cost of supply - So, as per the applicant these marketing events are advertisement, sales and promotion activities organized to earn consideration in the form of reciprocity from customers and increase in sales and brand value of the company and these items provided in the promotional events are not in the nature of gifts. What is consideration? - HELD THAT:- The consideration could be monetary as well as non-monetary. This payment can be in advance or after the supply has been made. This payment may be made by the recipient or by any other person. A consideration may be the monetary value of any act or forbearance i.e. the monetary value of doing something or refraining from doing something. But this payment made or to be made or any such act or forbearance must be in respect of or in response to or for the inducement of the supply of goods and services or both - As far as the supply of goods to the potential customers is concerned, the issue of consideration does not arise because the potential customers may not be actual customers/ buyers of the applicant company’s motor cars and motor bikes. The company has itself maintained that these free of cost supplies are made with an intention to earn consideration. This statement itself reflects that there is no consideration involved at the time of making of these free of cost supplies. It is also important to refer to the proviso to the definition of consideration as provided under the CGST Act. It contains 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. It is not the case of the applicant that any part of the amount received or to be received from the existing customers or the potential customers, as the case may be, at the time of supply of taxable products by the applicant company is applied to the goods provided on free of cost basis in these promotional events. The types of supply mentioned under the GST Act are taxable supply, exempted supply and nil rated supply. There is no provision of supply on free of cost basis under the CGST/SGST Act. The supply of goods on free of cost basis might be a part of company’s policy but certainly not in conformity with the provisions of the CGST/SGST Act and a company’s policy cannot override the provisions of law. The items distributed in the promotional events are gifts and section 17 (5) (h) bars credit of input tax with respect to gifts made by a registered person.
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