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TMI Blog2020 (12) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... , Swim-wears and Swimming Equipment's under the brand name of "SPEEDO". The applicant also gets the said garments manufactured from their job workers. 3. The Applicant had sought advance ruling on classification of goods and services is as under:- "Whether in the facts and circumstances of the case, the promotional products / Materials and Marketing Items used by the Applicant in promoting their brand and marketing their products can be considered as "inputs" as defined under section 2(59) of the CGST Act, 2017 and GST paid on the same can be availed as input tax credit in terms of section 16 of the CGST Act, 2017?" 4. The applicant states as under: 4.1 The applicant is engaged in the manufacture, distribution, and marketing of knitted and woven garments under the brand name of "Jockey" and swim wear and swimming equipments under the brand name of "Speedo". The applicant also gets the said garments manufactured from his job workers. The applicant market or sell their products through their own outlets and also through their distributors or dealers. 4.2 The applicant, to promote their brands & to market their products, is availing the services of advertisement agencies suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured the marketing items such as carry bag, table calendar, wall calendar, dairy, leather bags with embossing of their brand and wooden pens with engraving of brands etc. and on receipt of the same, the applicant is discharging the GST. The applicant is distributing such marketing items to their distributors/dealers to promote the brand & products. In view of the using of such marketing of items in promoting the brands & products being in the course of business or furtherance of their business and the said marketing items being "input" as defined in section 2(59) of CGST Act, 2017, the applicant is availing the input tax credit of GST paid on the same in terms of section 16 of CGST Act, 2017. 3.8 The applicant also exports such Promotional/ Marketing Materials to their overseas distributors/dealers on Free of Cost under Letter of Undertaking obtaining Guaranteed Remittance Waiver from their AD Bank as per Reserve Bank of India Guidelines to promote their brands in overseas countries and to market products. In view of the using of such marketing/ promotional items in promoting their brands and products being in the course of business or furtherance of their business and the said ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows: "14.... The word "business" is, as has often been said, one of the wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense..... 15. "The word 'business' connotes", it was observed by this court in Narain Swadeshi Weaving Mills Vs Commissioner of Excess Profits Tax, 1955 1 SCR 952 = 1954 (10) TMI 11 - SUPREME COURT "some real, substantial and systematic or organised course of activity or conduct with a set purpose. " The term business" therefore, particularly in fiscal statutes is of wide import." 4.4 The applicant submitted that the Hon'ble Bombay High Court in the case of Coca Cola India Pvt. Ltd. vs CCE, Pune -111 reported in 2009 (15) STR 657 (Bom.) = 2009 (8) TMI 50 - BOMBAY HIGH COURT interpreting the phrase "relating to business" used in the definition of "input service" as defined in rule 2(1) of CCR, 2004 and taking note of the word "business" interpreted by the Apex Court in various cases has held as follows: "25. The expression Business is an integrated/ continuous activity and is not confined / restricted to mere manufacture of the product. Therefore, activities in relation to business can cover all the acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the final product, then credit of service tax paid on such input service would be allowable." The principle laid down in the above judgements equally applies to section 16 of CGST Act, 2017 and therefore, the promotional / marketing items sent to their showrooms & to their distributor/ dealer's showrooms to use in promoting their brands and marketing their products, will form integral part of their business and amounts use of such goods in business or furtherance of the applicant's business. Therefore, the same qualify as "input" in terms of section 2(59) of CGST Act, 2017 and GST paid on the same is entitle to avail as "input tax credit" in terms of section 16 of CGST Act. 2017. 4.7 The applicant submitted that promotional/ marketing items using by them at point of purchase i.e. their showrooms or to their distributor/dealer's showrooms is to promote their brands and made known the range of products manufactured by them. The applicant is not simply distributing the said promotional/marketing items at free of cost to their distributors/dealers, they are distributing the same with obligation to promote their brand and market their products by using the said promotional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase are also one kind of advertisement of brand and products. Once the advertisement service used in promoting the brand & marketing the goods qualify as "input service" in terms of section 2(60) of CGST Act, 2017, the goods used in promoting the brand and marketing the products also qualify as "input" in terms of section 2(59) of CGST Act, 2017 and consequently the applicant is entitle avail the GST paid on the said promotional/ marketing items as "input tax credit" in terms of section 16 of CGST Act, 2017. 4.11 Without prejudice to the above submissions the applicant submit that in respect of the promotional/ marketing items to their own showrooms there is neither "supply" nor there is gift and hence applying the provision of section 17(5)(h) of CGST Act, 2017 and apportioning the input tax credit does not arises. 4.12 In view of the above submissions, the promotional/ marketing items sent to their showrooms & to their distributor[dealer's showrooms to use in promoting their brands and market their products will amount to use of said goods in business or furtherance of the applicant's business. Therefore, the same qualify as "input" in terms of section 2(59) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customers in identifying the exclusive brand operator & retailer of the applicant's brand in the market, the applicant is getting manufacture of the DISPLAY BOARDS with their brand logo and name of the exclusive brand operators and retailers. The same will be displayed at the outside show rooms of their exclusive brand operators and retailers. 6.4 Uniforms The applicant submitted that to promote their brands and to create an identity of their brands and to help the customers in recognizing sales girls & boys of their brands at the point of purchase i.e. showrooms of their exclusive brand operator & retailers and at the exhibition centers, the applicant is providing the UNIFORMS to the sales girls and boys of their brands. 6.5 Posters The applicant submitted that for promotion of their newly introduced products and to get the attractions of the customers at the point of purchases, the applicant gets printed the POSTERS in respect of the newly introduced products and provides the same to their exclusive brand operators and retailers to post the same at show rooms so that customers will know about their newly introduced range of products. 6.6 Gifts The applicant submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promotional items have been transferred and same not being permitted for their personal use of the Exclusive Brand Operators and Retailers, there is no restriction for the applicant to avail the GST paid on such promotional items as "input tax credit". 8. In the above factual position and submissions made above, the applicant requests that a ruling may be given that the promotional items procured and used at the point of purchase in promoting their brands and market their products will qualify as "input" in terms of section 2(59) of CGST Act, 2017 and GST paid on the same is entitle to avail as "input tax credit" in terms of section 16 of CGST Act. 2017. PERSONAL HEARING: / PROCEEDINGS HELD ON 28-07-2020 9. Sri. Kamalakara, Cost Accountant & the duly authorized representative alongwith applicant appeared for personal hearing proceedings on 28-07-2020 before this authority and reiterated the submissions already made. FINDINGS & DISCUSSION 10. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made by him when he appeared for the personal hearing. We have also considered the issues involved, on which advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the retailers, distributors and franchisees to be used by them or give them free of cost to the purchasers of their materials. Hence they are promotional materials to attract and encourage sales of their goods and hence are expenses in his accounts. In this case, the goods do not remain in the account of the applicant and is transferred to the accounts of the retailers, distributors and franchisees, with a condition that they have to be given free of cost to the ultimate consumers, i.e. sales personnel in case of uniforms, personnel and customers in case of gifts and to the customers in case of carry bags. 12. The issues in the above is what is the treatment to be given to those materials distributed to others. The analysis of the above shows clearly that there are two types of materials, a. those which are delivered to the distributors, franchisees and retailers but the ownership lies with the applicant, but the same are used in their premises (hereinafter referred to as "non distributable goods") b. those which are delivered free of cost to the distributors, franchisees and retailers to be distributed to their employees and customers (hereinafter referred to as "distributa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes - (a) The integrated goods and services tax charged on import of goods; (b) The tax payable under the provisions of sub-sections (3) and (4) of section 9; (c) The tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act; (d) The tax payable under the provisions of the respective State Goods and Services Tax Act; or (e) The tax payable under the provisions of section (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, But does not include the tax paid under the composition levy;" From the above, the taxes paid by the applicant on the supply of goods or services or both to him qualify as input tax credit. 12.5 Further section 16 of the GST Acts provides for the eligibility for taking/ availing input tax credit. Since the applicant has used or intended to use the goods and services procured in the course or furtherance of business, the applicant is entitled to take input tax credit, subject to other provisions of the Act and there is no blockage attributable to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been received seeking clarification on issues raised with respect to tax treatment of sales promotion schemes under GST. To ensure uniformity in the implementation of the law across the field formations, the Board, in exercise of its powers conferred under section 168(1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as "the said Act") hereby clarifies the issues in succeeding paragraphs. 2. It has been noticed that there are several promotional schemes which are offered by taxable persons to increase sales volume and to attract new customers for their products. Some of these schemes have been examined and clarification on the aspects of taxability, valuation, availability or otherwise of Input Tax Credit in the hands of the supplier (hereinafter referred to as the "ITC") in relation to the said schemes are detailed hereunder: A. Free samples and gifts: i. It is a common practice among certain sections of trade and industry, such as, pharmaceutical companies which often provide drug samples to their stockists, dealers, medical practitioners, etc. without charging any consideration. As per sub-clause (a) of sub-section (1) of section 7 of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of para 2 of Schedule I to the CGST Act 2017. Thus the applicant need to discharge applicable GST on such supplies and thereby is entitled to avail input tax credit on the said supply of goods. 13.4 The second category is that of all brands stores and they do not fall under the related persons to the applicant. Further the above Circular also addresses applicant's contention that items supplied for promotion of the brand is as per contractual obligation & hence can't be called as gifts. The Circular makes it abundantly clear that these items would be called gifts. Hence in this case, since the persons to whom the distributable goods are given are not related parties and are distinct persons and are not employees of the applicant, the transaction is not coming under the scope of supply and hence the applicant is not eligible to claim input tax credit on the same. 14. In view of the foregoing, we pass the following RULING 1. The ITC on GST paid on the procurement of the "distributable" products which are distributed to the distributors, franchisees is allowed as the said distribution amount to supply to the related parties which is exigible to GST. Further the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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