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2018 (10) TMI 747

Levy of GST - Supply or not? - free tickets given as “Complimentary Tickets” - input tax credit - Circular No. 47/21/2018-GST dated 8th June 2018 - CGST Act, 2017. - The applicant has withdrawn his Advance Ruling application while indicating that his case is similar to the case of an Original Equipment Manufacturer (OEM) which has been discussed by the said circular as not constituting a supply, and the ‘concerned officer’ has reached a conclusion diametrically opposite that the activity of the applicant of supplying complementary tickets free of charge would amount to supply. Therefore, allowing for withdrawal of the present application in terms of the applicant, without discussing the case on merits would not be in public interest. Hence, circumstances call for discussion on merits rather than allowing withdrawal, especially when both interested parties to the Advanced Ruling application hold contrary views. - Whether free tickets given as “Complimentary Tickets” falls within the definition of supply under CGST Act, 2017 and thus, whether the applicant is required to pay GST on such free tickets? - Whether the applicant is eligible to claim Input Tax Credit in respe .....

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2017, would not stand the test of legal interpretation of Section 7 of the CGST Act, 2017 and would thus be fallacious - the activity of the applicant in issuing complementary tickets to persons is covered under each limb of para 5(e) of Schedule II of the CGST Act, 2017. Therefore, by this measure too, the activity of the applicant of providing complementary tickets free of charge to some persons for enjoying cricket matches would also be covered under the scope of supply as per section 7(1)(d). - 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. - Input tax credit - Held that:- 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 ti .....

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te Taxes, S.A.S. Nagar, Mohali were sought. The concerned officer vide his letter dated 24-05-2018 stated that free tickets given as Complimentary Tickets fall within the definition of supply under CGST Act, 2017 and thus, the applicant is required to pay GST on such free tickets and applicant is also eligible to claim Input Tax Credit in respect of complimentary tickets. A personal hearing of the applicant in this regard was held on 16.07.2018 before the Advance Ruling Authority, Punjab on which date Sh. Praveen Kashyap and Sh. Adarsh Gupta, Consultants of the firm appeared on behalf of the applicant. The questions raised by the applicant were discussed at length. The consultants requested for adjournment for submission of documents. On their request. the case was adjourned with the directions to submit written submission by 30-07-2018. The applicant has sent written submission through e-mail received on 30-07-2018, which is reproduced as under: Written submissions & synopsis by the Applicant in respect of application 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 Ar .....

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goods or services without any consideration (Monetary or Kind). We find it pertinent here to understand the treatment of free supply under pre-GST regime: a. Free supply of goods was not taxable as Value Added Tax (VAT)/ Central Sales Tax (GST) was chargeable only on sales . The term Sales was defined under the Sale of Goods Act, 1930 which was followed to State VA T laws to mean a transfer of goods for a consideration. b. Free supply of services was not chargeable to Service Tax as Service Tax was liable to be paid on the gross amount charged for services, and the term service was defined to mean an activity provided by one person to another for consideration, Under the GST regime, treatment of free supply has undergone a change on following grounds - Firstly, the treatment of free supplies made to related and unrelated parties differ Secondly. even though GST was contemplated to treat goods and services alike, provisions 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 Se .....

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ct, 2017 and thus not exigible to GST. Input tax credit 13. One of the major advantages sought to be achieved from implementation of GST is the removal of cascading effect by facilitating seamless flow of credit. The statement of Objects and Reasons to the Constitution (122nd Amendment) Bill, 2014, enacted as the Constitution (101st Amendment) Act, 2016 categorically includes elimination of cascading effect This would be achieved by providing for the availment of Input tax credit to the purchasing dealer in respect of the tax charged by the supplying dealer 14. With a view to avoid the cascading effect o/ taxes and build-up of tax costs. the government has consciously streamlined the credit restrictions applicable under the GST regime. Section 17(5) specifically restricts credit of input tax on goods disposed 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 cred .....

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or effecting exempt supplies under the said acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. Supply of complimentary tickets is not a supply in itself and thus cannot be said to be an exempt supply. 19. Further Section 17(3) provides that the value of exemption supply under sub section (2) shall be such as may be prescribed Reference to chapter V (Input Tax credit) of CGST Rules 2017, there is no valuation mechanism prescribed for free supplies. Explanation to Rule 42 of CGST Rules 2017 clarifies For the purpose of this clause, it is hereby clarifies that the aggregate values of exempt supplies and the total turnover shall exclude the amount of any duty or tax 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 indefeas .....

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s. The credit was disputed on the grounds that the trophies were distributed free of cost and therefore, no credit could be claimed. The House of Lords held that where a direct link could be shown between the giving of those assets and consideration received by the taxpayer from persons other than the recipients, that the awards dinner had been organized as a self-supporting event, for which the ticket receipts were intended to cover the total cost including the provision of trophies; and that accordingly, the purchase of the tickets provided the consideration for the supply of trophies to the award winners and output tax was not payable separately by the company on that value. Circular No. 47/21/2018-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 .....

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on 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 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 applican .....

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ets 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. 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 .....

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that can be exchanged for goods or services, typically one given as a gilt or forming part of a promotional offer ; and on website https://en.oxforddictioners.com/defination/token/voucher voucher is defined as a small printed piece of paper that entitles the holder to a discount or that may be exchanged for goods or services . 6. Therefore. the contention of the applicant 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 .....

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d under each limb of para 5(e) of Schedule II of the CGST Act, 2017. Therefore, by this measure too, the activity of the applicant of providing complementary tickets free of charge to some persons for enjoying cricket matches would also be covered under the scope of supply as per section 7(1)(d). 9. In view of the above discussion and findings, it 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 .....

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