TMI Blog2018 (10) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... d thus, whether the applicant is required to pay GST on such free tickets? Whether the applicant is eligible to claim Input Tax Credit in respect of complimentary tickets? Held that:- While, the said Circular dated 8.6.2018 clarifies the case of an OEM where he is providing Dies and Moulds owned by him free of cost to a component manufacturer, who further uses these to make components for the OEM and supply such components back, this situation cannot be compared to the situation of handing out complementary tickets for viewing Cricket matches by any stretch of imagination - In the present case, there is no owned property of the applicant being given to the receiver for the purpose of being used for value addition and in making of inputs which are received by the applicant, Therefore, the case of the applicant is differentiated from the case of the OEM which is the basis of Circular, and hence the contention of the applicant that the questions posed by him in the present Advance Ruling application stand answered by the said Circular does not hold any force. Perusal of the definition of the word ‘consideration’ shows that it is an inclusive definition and covers not only p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 9 of the said Acts. the question of whether Input Tax Credit would be available on inputs going into such complementary tickets would be answerable in affirmative. The question of proportional availment of ITC comes into play only when part of the final goods or services are taxable and part of them are exempt. In the present case since all tickets supplied by the applicant including complementary tickets would be taxable, the applicant would clearly be eligible for claim of Input Tax Credit as per the provisions of Section 16 of the CGST Act,2017. Thus, the applicant would not be eligible to take credit on the tax leviable on supply of complementary tickets by him, but would be eligible to avail credit of input and input service going into provision of supply of the impugned complementary tickets. Ruling:- The activity of the applicant of providing complementary tickets free of charge to some persons would be considered supply of service as per provisions of both Section 7(1)(a) and 7(1)(d) and would therefore be leviable to tax as per provisions of Section 9 of the CGST Act, 2017 and the parallel Section 9 in the Punjab GST Act, 2017. Since all tickets supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for Advance Ruling: 1. That, M/s. K.P.H. Dream Cricket Private Limited, (for short applicant or KPH ), having its registered office at Plot No. 372 Industrial Area. Phase-9, Mohall, SAS Nagar, Punjab-160062 is a franchisee of Board of Control for Cricket in India (for short BCCI ) for the purpose of establishing and operating a cricket team to participate in Indian Premier League T20 cricket tournament (for shod IPL ), under the title of kings XI Punjab . 2. That IPL is a domestic professional Twenty-20 cricket tournament in India, organized by BCCI-IPL every year under the gaming rules as prescribed by the BCCI-IPL and International Cricket Council ( ICC ). 3. The Applicant has participated in a bid invited by the BCCI and after being successful in the said bid, entered into a Franchise Agreement, the Appellant has been permitted to establish and operate the team Kings Xl Punjab 4. Furthermore. the Applicant to participate in IPL with other franchisees wherein few matches are held at each franchisee s home ground. During the financial year 2018-19, the Appellant Will participate in IPL including the matches held at their home grounds in Mohali (Punjab) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns relating to credit of free supplies Of goods differ from those relating to credit of free supply of services. Free supply and its taxability under GST 9. Under GST, the incidence of tax is supply . The term supply has been defined in an inclusive manner under Section 7 of the CGST Act. What this effectively means is that the definition is not exhaustive, and there may be some supplies which are not specified within the definition of the term 10. The term supply is defined to include all forms of sale, transfers, exchanges, barters etc. made or agreed to be made for a consideration in the course or furtherance of business. However, supplies between related persons or distinct persons (different offices of the same entity) in the course or furtherance of business even if not for a consideration are supplies (in terms of Schedule I to the CGST Act). As a result, free supplies between unrelated persons. cannot be said to supplies , therefore, not taxable. Whereas free supplies between related persons are supplies and therefore, taxable. 11. The term related persons has been defined in the explanation to Section 15 of the CGST Act. The said definition of ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed of by way of free samples . It is relevant to note that the manner in which this provision has been drafted, when read along with credit reversal formula, suggests that credit is restricted only where such goods are disposed as is. and not necessarily in cases where such goods are incorporated into a final product which is disposed free of cost. Therefore, it appears that credit relating to traded goods supplied free of cost is restricted, whereas credit relating to manufactured goods supplied free of cost may not restricted. 15. As regards free supply of services, the CGST Act does not prescribe any credit restriction. Therefore, in view of the applicant even though the output (free supplies of) services are not taxed, there is no need for reversal of input tax credit. 16. Section 16 provides that every registered taxable person shall in the manner specified in section 44, be entitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business. In case any inward supply of goods and/ or services is used for non-business purpose, the credit thereon is not allowed. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied under entry 84 of List I of the seventh schedule to the constitution and entry 51 and 54 of list II of the said schedule. Thus assuming but not agreeing if supply of free tickets is said to be exempt supply, there are no machinery provisions for valuation of free supplies and calculation of ITC reversal thereof under CGST Act 2017 read with Rules ibid 20. It is a settled position that Input Tax Credit is an indefeasible right of the assesses which cannot be forfeited in absence of any ambiguity or clarity Free supplies 21. The act of giving free supplies is similar to the promotional and advertising activities undertaken by every business which are the basic Ingredients and inevitable. Moreover, when a business makes a free supply, the cost which the business has incurred is always taken into account by him in fixing the price of the rest of supplies, Thus, albeit-indirectly, the exchequer will get GST even on the value of the free supplies and there is no revenue loss as such to the government. Similar observation has been made by Hon ble Gujarat High Court in Para 17, in the case of Ruby Laboratories [ Ruby Laboratories vs. Commissioner of Sales Tax on 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/2018-GST dated 8th June 2018 25. We, respectfully wish to bring to your notice that CBIC has issued a clarification vide Circular No. 47/21/2018-GST dated 8th June 2018 vide which it has been clarified that supply of FOC basis does not constitute a supply as there is no consideration involved It also clarifies that where FOC supply is made in the course o/ furtherance of business, there is no requirement of reversal of credit Relevant abstract of the circular is re-produced hereunder- SLNo. Issue Clarification 1.1 Whether moulds and dies owned by Original Equipment Manufacturers (OEM) that are sent free of cost (FOC) to a component manufacturer is leviable to tax and whether OEMs are required to reverse input tax credit in this case? 1.1 Moulds and des owned by the original equipment manufacturer (OEM) which are provided to a component manufacturer (the two not being related persons or distinct persons) on FOC basis does not constitute a supply as there s no consideration involved. Further, since the moulds and dies are provided on FOC basis by the OEM to the compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a supply as there s no consideration involved. Further, since the moulds and dies are provided on FOC basis by the OEM to the component manufacturer in the course or furtherance of his business, there is no requirement for reversal of input tax credit availed The two questions on which we have sought advance ruling from your good office are the same which have been clarified by the above cited circular. Discussions and findings: We have carefully gone through the facts of the case, the contentions of the applicant and legal provisions relevant to the questions raised in the present application. It is interesting to note that after submission of the application, personal hearing and further additional submissions made by the applicant, after the applicant had been spiritedly arguing as to how handing out of complementary tickets would not amount to supply under the GST Act, 2017, the applicant suddenly withdrew his advance ruling application. It is also interesting to note that the applicant has cited the Circular No. 47/21/2018-GST dated 8.6.2018 while withdrawing the application, which circular he had already referred to in his written submissions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the applicant that the questions posed by him in the present Advance Ruling application stand answered by the said Circular does not hold any force. 3. For answering the question of whether free tickets given as complementary tickets fall within the definition of supply under the CGST Act, 2017 and parallel provisions of Punjab GST Act, 2017, and whether the applicant would be required to pay tax on such free tickets, we would take recourse to section 7 of CGST Act 2017 and the parallel section 7 of the Punjab GST Act 2017 which lays down the scope of supply. 4. As per Section 7(1)(a) 01 the CGST Act, 2017, the expression supply includes all forms of supply of . services as sale, transfer, barter, exchange, license rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business The word consideration has also been defined in Section 2(31) of the CGST Act as under: (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant that since complementary ticket recipient does not make any payment to the applicant. it can be said that supply of tickets is without any consideration and is accordingly not covered under Section 7(1) (a) of the CGST Act. 2017, would not stand the test of legal interpretation of Section 7 of the CGST Act, 2017 and would thus be fallacious. The applicant has clearly missed the import of clause (b) in the definition of consideration given in Section 2(31) of the CGST Act, 2017 which certainly covers the activity of the applicant of giving complementary tickets to certain persons in the furtherance of his business and would thus be covered under scope of supply defined in Section 7(1 )(a) of the CGST Act, 2017 7. Further, the provisions of Section 7(1)(c) lay down that the activities specified in Schedule I made or agreed to be made without a consideration would be included in the expression supply . Perusal of Schedule-I. however, shows that the present case would not fall into any of the four activities mentioned in Schedule l. 8. However, as per provisions of Section 7(1)(d), the activities referred to in Schedule II are to be treated as supply of goods or servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be clear that the activity of the applicant of providing complementary tickets free of charge to some persons would be considered supply of service as per provisions of both Section 7(1)(a) and 7(1)(d) and would therefore be leviable to tax as per provisions of Section 9 of the CGST Act, 2017 and the parallel Section 9 in the Punjab Act, 2017. 10. The second question of the applicant as to whether he is eligible to claim Input Tax credit in respect of complementary tickets also flows from the first question regarding taxability of complementary tickets discussed above. Since the activity of providing the complementary tickets would amount to supply under provisions of CGST Act and parallel provisions of Punjab GST Act, 2017 and would be leviable to tax under section 9 of the said Acts. the question of whether Input Tax Credit would be available on inputs going into such complementary tickets would be answerable in affirmative. The question of proportional availment of ITC comes into play only when part of the final goods or services are taxable and part of them are exempt. In the present case since all tickets supplied by the applicant including complementary tickets would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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