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BRAND PROMOTION AS BUSINESS AUXILIARY SERVICE ?

Goods and Services Tax - GST - By: - Dr. Sanjiv Agarwal - Dated:- 1-9-2017 - Though we are now in an era where goods and services, both shall be taxed under one tax, i.e. Goods and Services Tax (GST), the indirect tax Tribunal, CESTAT has recently settled a confusion or dispute on taxability of brand promotions activities as business auxiliary services. In GST, it would remain a service only. The case on hand is Datamini Technologies (India) Ltd. v. CCE, Thane-I 2016 (12) TMI 1535 - CESTAT MUMBA .....

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round that reimbursement of advertisement expenses received from Intel and Microsoft were taxable services of assessee. The case of Revenue is that these displays are for a consideration and the said consideration is taxable under Section 65(105)(zzb) of Finance Act, 1994 for having rendered 'business auxiliary service' within the meaning of Section 65(19)(i) of Finance Act, 1994. M/s. Datamini Technologies (India) Ltd. and M/s. Zenith Computers Ltd. were determined as being liable to ta .....

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re personal computer. The portion of definition relating to sale of goods referred to in Section 65(19) (i) of Finance Act, 1994 will not apply. Assessees are manufacturers of branded products and it cannot be inferred that in process of promoting their own products, they marketed components in personal computers for consideration paid by Intel Corporation and Microsoft Corporation. Assessees are reimbursed some portion of cost of advertising and publicity conducted upon inclusion of logos of tw .....

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ity in the market owing to inclusion of their respective logos. Assessees' products likely to find greater acceptance among potential customers owing to the acknowledged incorporation of products of two entities in computers manufactured by them. Reimbursements are circumscribed by funds added in proportion to procurements effected by assessee from two suppliers and not from enhanced sales attributed to alleged promotion of product would reinforce conclusion that objective of schemes not enh .....

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liary service'. Since there was a difference of opinion, the following question was refereed to third member for decision by majority: Whether the Member (Judicial) is correct in holding that the appellants are engaged in the activity of promoting the brand of Intel Microsoft consequently, the activity of 'promotion or marketing of logo or brand' does not cover under the category of Business Auxiliary Service by relying on the judgment of Jetlite (India) Ltd. 2010 (12) TMI 40 - CESTA .....

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a service incidental or auxiliary to any activity specified in sub- clauses (i) to (vi), .............' A key element in the definition of 'business auxiliary service' are the goods in relation to which service is rendered. The goods are to be produced or provided by or belonging to the client. There is no dispute that the goods supplied by Intel and Microsoft are bought by appellants thus ruling out an allegation that service is rendered by appellants in relation to these goods. Ne .....

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bing an organized discipline in management of commercial organizations. In the context of its employment in the definition supra, it would appear that legislative intent tends towards the latter. Marketing professionals consider the four Ps to be at the very foundation of their vocation, viz., price, product, promotion, and place. Unless all the four facets are mixed in the formulation of strategy, the expression 'marketing' may not be an appropriate usage and will not apply to the activ .....

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n it be inferred that, in the process of promoting their own products, the components in the personal computers were also marketed for a consideration paid by Intel and Microsoft, Obviously, the allegation of having promoted the products of these two entities , can only be with reference to future releases from the two entities. Appellants are reimbursed some portion of the cost of advertising and publicity conducted upon inclusion of the logos of the two entities in the advertising and publicit .....

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scale and reputation, appellants are incomparable with the two global giants. It is difficult to conceive that the products of these two entities will find additional acceptability in the market owing to the inclusion of their respective logos. The products themselves are amenable to utilization only by computer manufacturers and the publicity, if any, among the potential customers of the two appellants is unlikely to derive any economic benefits to the supplier. On the contrary, the products of .....

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