TMI Blog2019 (3) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... r of any existing movable or immovable property voluntarily and without consideration in money or money s worth. It is seen from the definition that the transfer i.e the gift given in such a case has to be voluntary - A contractual arrangement implies especially in view of the magnitude and area of the applicant s business that, it should also be agreed by the customer in writing to such scheme floated by the applicant. We find that they have not submitted any such contract/agreement and in support of their contention, as Exhibit A they have only submitted a brochure/writeup/invitation with the heading Kharif Gold Scheme 2018. Hence we find that the gold coins are not given to their customers under any contractual obligation and are voluntarily given on certain conditions achieved by their customers. In the instant case it is seen that the applicant has assigned a value to the gold coins to be given gifts and the value is ₹ 3,200/- per gm. They have not explained as to how they have arrived at the value because value of gold changes everyday. Secondly the Scheme announced by them states that customers who lifted the products as per the scheme and made payments as per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S SOUGHT 1. This Application is being filed by M/s. Biostadt India Limited ( the Applicant /the Company ). The Applicant, having Good and Service Tax (GST) Registration No. 27AACCB1830G123 is inter alia engaged in the business of developing, manufacturing and distributing crop protection chemicals and hybrid seeds. 2. Biostadt India Limited has been serving the farming community for over three decades. The company provides a helping hand to the farmers by providing them with top-of-the-Iine agricultural inputs and services. 3. Over a period of time, the applicant has diversified into a range of seaweed-based biotechnological inputs using fermentation technology, under the well-known brand Biozyme . They also deal in crop protection chemicals - insecticides and pesticides and has made its foray in hybrid seeds market. 4. The manufacturing facilities of the applicant are multi-locational and are very well-equipped with state-of-the-art technology and testing equipment which produce quality products. 5. In order to ensure availability of various products and services, the applicant has extensive network which includes 3 mother depots, 22 stock points and a network of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Amount (Rs.) June 1 lakh July 1.5 lakh Aug 1.5 lakh Total 4 lakh c. Only the above mentioned products are eligible under the scheme. d. Stock returns are not allowed under the said scheme. e. No other discounts are eligible under the said scheme. f. Both the legs of the scheme are independent of each other. Customer satisfying any one leg will be entitled to reward of that leg only. g. A meeting will be called at the end of the scheme period and customers who have satisfied either of the lifting or collection criteria shall be entitled to attend such meeting. h. During the meeting the customer shall be rewarded with the 8gms or 10 gms gold coin depending upon the criteria fulfilled by him. 10. The above mentioned scheme is in force. The applicant will be procuring gold coins from jewelers which are to be distributed at the end of the scheme. As per notification 1/2018 - CGST (Rate) dtd. 28.06.2017, gold is leviable to GST at the rate of 3 percent. 11. The applicant intends to maxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be an input tax for the purpose of Section 16(1) read with Section 2(62) of the CGST Act. In course or furtherance of business: The notable requirement under Section 16(1) of the CGST Act is that the credit of input tax claimed on a supply of goods or services should be used in course or furtherance of the business. While the term business is defined under CGST act, the phrase in course or furtherance of business is not defined in the law. Dictionary meaning of the term furtherance implies advancement, promotion of scheme, etc. Therefore furtherance of business would imply advancement of business, promotion of business. Any activity carried on with a purpose to achieve business objectives, business principles, business continuity and stability would per se amount to an activity in course or furtherance of business. The applicant has launched Kharif Gold scheme with an intention to maximize the sales and collections of the company. The scheme so implemented grants an advantage to the applicant over other competitors in the market. These schemes ensure brand loyalty and market loyalty which are the important aspects of any business. Hence it would be reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble or immovable property voluntarily and without consideration in money or money s worth. The Honorable Supreme Court cited the definition of gift from Corpus Juris Secundum, Volume 38 in the case of Sonia Bhatia v. State of UP [1981 SCR (3) 239,1981 SCC (2) 585) = 1981 (3) TMI 250 - SUPREME COURT as follows: A gift is commonly defined as a voluntary transfer of property by one to another, without any consideration or compensation therefor. A gift is a gratuity and an act of generosity and does not require a consideration, but there can be none; if there is a consideration for the transaction, it is not a gift. 2.10. On the basis of above jurisprudence, one can reasonable conclude that gift is a gratuity and does not require any consideration. If a consideration is attached to a transaction, then it cannot be termed as a gift. Emotional consideration such as love, affection, etc. may be attached to a gift but there cannot be a monetary consideration to a gift. It may also be noted that gift cannot arise out of a contractual obligation. If a supply is made under a contractual obligation then it cannot be termed as gift. Supplies made out of non-legal cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lucy Draw - Surprise Gifts Payment No. of Coupons 1 lakh 1 2 lakh 3 3 lakh 4 4 lakh 6 Terms Conditions: Only above listed products are eligible for the scheme Gold price is calculated @ ₹ 3200/-per gm No other discounts are eligible under the scheme Scheme Period is from June 18 to Aug 18 Customers who lifted the products as per the scheme and made payments as per the scheme are invited for meeting. Prices of the products vary for different SKUS No Stock Returns under the scheme. In case of any discrepancy company reserves the right to modify/cancel the scheme without prior notice THE CENTRAL GOODS AND SERVICE TAX ACT (CGST), 2017 Relevant provisions under CGST Act, 2017: 1. Inputs [Section 2(59)1: Input means any goods other than capital goods used or intended to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: 7. Blocked credits (Section 17(5): Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: (a) motor vehicles and other conveyances except when they are used- (i) for making the following taxable supplies, namely: (A) further supply of such vehicles or conveyances; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation of goods; (b) the following supply of goods or services or both (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. laud, building or any other civil structures; ii. telecommunication towers; and iii. pipelines laid outside the factory premises. THE GIFT TAX ACT, 1958 Relevant provisions under the Gift Tax Act, 1958: 1. Gift (Section 2(xii): Gift means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money s worth, and includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section; [ Explanation .-A transfer of any building or part thereof referred to in clause (iii), clause (iiia) or clause (iiib) of section 27 of the Income tax Act, by the person who is deemed under the said clause to be the owner thereof made voluntarily and without consideration in money or money s worth, shall be deemed to be a gift made by such person;] Additional submissions dated 19.11.2018 We reiterate our submissions dated 23.08.2018, 10.09.2018 in the course of preliminary hearing wherein we have sought ruling on admissibility of input tax credit of tax paid on purchase of gold coins for our sales scheme. Without rejudice t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfies the criteria laid under the scheme. Giving away gold coins to customer cannot be termed as voluntary act of the applicant and in turn cannot be termed as gift distributed to customer Considering the above conditions, we earnestly request your good offices to consider our application for allowability of Input Tax Credit on gold coins distributed as per terms and conditions of a scheme. --- Value of Gold coins is not to be included in the value of goods: --- Section 15(1) of CGST Act provides that value of supply of goods shall be the transaction value i.e. price actually paid or payable for said supply of goods where the supplier and recipient of supply are not related and price is the sole consideration for the supply. --- Related persons is defined in explanation to section 15 of CGST AGNES --- Our customers do not fall under any of the said criteria of related person --- Price of all the products are pre-defined and customers are obliged to pay that price for purchase of products. --- Price is the sole consideration received from the customers for sales made by us. --- Section 15(1) criteria is satisfied in our case and hence value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme described in Annexure I of their submission are NOT INPUTS and hence, GST paid on such a purchase does not qualify to be an input tax for the purpose of Section 16(1) read with Section 2(62) of the CGST Act 2017 (hereinafter referred to as the Act ). 2. The basic provision relating to the claim of input tax credit is covered u/s 16 of the CGST Act 2017. The section heading reads as Manner of taking input tax credit . The term input tax credit has also been defined U/S 2(63) of the CGST Act 2017 as credit of input tax as defined in section 2(62). 3. Input is defined u/s 2(59) of CGST Act 2017 to mean any goods other than capital goods which are used or intended to be used by a supplier in the course or furtherance of business 4. What is important in the definition of input is the use of the phrase in the course or furtherance of business . While the term business has been defined, the phrase in the course or furtherance of has not been dealt with in any manner under the GST law. Hence, there is no definite yardstick to find out whether some activity is being carried out in the course or furtherance of a business or not. Each case would need to be examined, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act 2017 stipulates that the input tax credit with respect to the goods disposed of by way of gift shall not be allowed. Or in other words, it is stipulated that no ITC on any goods can be availed, if they are given as gifts, whether or not in course of furtherance business. 2. ITC on goods given away or disposed as gifts should not be available when no tax is being paid on their disposal. The logic of satisfying Section 16 is of no avail to earn this credit lawfully, because Section 17(5) itself starts with a non obstante clause, which means even if Section 16 allows, Section 17(5) shall block. Moreover, Section 17 (5) is a specific provision because it is an established principle that specific provisions prevail over general provisions. This doctrine has always been upheld. The cases on the subject will be found collected in the third edition of Maxwell which is generalia specialibus non derogant - i.e. general provisions will not abrogate special provisions . Similar application arises when there are two provisions under the same statute also, one of which is specific and the other general. If there is dispute between Section 16 and Section 17(5), Section 17(5.) should pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) TMI 250 - SUPREME COURT and contended that it is applicable to their case. The facts of the case were totally different and also the said judgment was delivered under a different legislation and therefore, the same cannot be made applicable to the facts of this case which is being adjudicated under GST ACT. In the case of KONE ELEVATOR INDIA PVT LTD VS. STATE OF TAMIL NADU as reported in (2014(304) ELT 161. (SC) = 2014 (5) TMI 265 - SUPREME COURT it has been held that, it should be strict and literal, what is applicable in one taxing statute may not be applied to another taxing statute (Per: F.M. Ibrahim Kalifulla.] (Para-84). Hence, the case law. cited by the applicant in this respect is not acceptable. 8. In case the Advance Ruling Authority accepts the contention of the applicant and allows the availment of ITC on gold coins, then the accounting of the stock and disbursement of gold coins should be required to be maintained. Para : in the light of the above discussion, we pray that the Honorable Advance Ruling Authority may pass an order as deemed legal and necessary in the interest of revenue, This reply is made with the approval of the Additional Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of Section 16(1) read with Section 2(62) of the CGST Act. The jurisdictional officer has also made submissions and has opined that the Gold coins to be distributed as mentioned above, are not inputs and hence, GST paid on such a purchase does not qualify to be an input tax for the purpose of Section 16(1) read with Section 2(62) of the CGST Act 2017 (hereinafter referred to as the Act ). It has been submitted that the gold coins are not inputs because the said Distribution of gold coins is not in line with the basic business model, the gold coins are not essential for continuity in supply and the distribution of gold coins are not concerned with the making of taxable supply for consideration unless the distribution is looked as a hidden discount. We find that the applicant has floated the subject scheme for the period June, 2018 to August, 2018 only, by way of which gold coins of different denominations would be given to those customers who lifted a certain quantity of products or made a certain amount of payment. Thus it is seen that it is only those specific customers who fulfill the conditions would be able to avail the benefit of the subject scheme. The applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir customers under any contractual obligation and are voluntarily given on certain conditions achieved by their customers. In the present scenario we will try to understand the word gift in the common parlance aa it is also used in the present day. There are several schemes advertised in the market by business houses which promise to give assured gifts to their customers, for eg. In the city of Mumbai and its suburbs various builders had floated advertisements stating that the first x numbers of buyers of flats in their residential construction projects would be give a car/100gms. Gold coins, etc. Similarly malls in Mumbai also offer assured gifts on purchase above certain amounts by their customers. Hence in the present context the word gift has an enlarged scope according to us and has its own colour. In all such cases, as in the present case, the statement that goods, in this case gold coins, will be given to customers who satisfy certain conditions is nothing but assurance of giving away gifts on those conditions being achieved by the customers. Under the GST laws the intention for non-granting/denial of setoff is envisaged in situations where there is no tax on outpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of gold changes everyday. Secondly the Scheme announced by them states that customers who lifted the products as per the scheme and made payments as per the scheme are invited for the meeting. We now deal with one of the contention of the applicant that they have a contractual arrangement with the customer wherein if the distributor purchases certain amount of company s product or makes payment in a prescribed manner, then he shall be entitled to a gold coin of specific weight. This can be inferred as if the distributor of the applicant is providing services of increased sale for which consideration is in the form of a gold coin. As per Section 7 of the CGST Act, disposal, or the case may be, barter, made or agreed to be made for a consideration in the course or furtherance of business is supply liable to tax. We find in the present application, the applicant has not shown proof of payment of output tax. The only conclusion that can be drawn in the present case is that the distribution of gold coins by the applicant is not but gifts and hence the transaction is covered by the provisions of Section 17(5) of the Act. To sum up ITC on gifts will not be available when no GST ..... X X X X Extracts X X X X X X X X Extracts X X X X
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