TMI Blog2021 (10) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... n be termed as composite supply? - HELD THAT:- The supply shall not fall under the category of composite supply since supply of hosiery goods and goods under promotional scheme cannot be considered as naturally bundled and supplied in conjunction with each other in the ordinary course of business - the supply of hosiery goods and goods under promotional scheme are separate supply and tax on the supply shall be levied at the rate of each such item as notified by the Government. Admissibility of input tax credit on the items intended to be supplied by the applicant at a nominal rate under promotional scheme - HELD THAT:- In the instant case, the applicant intends to provide the said goods to the retailers at a certain consideration, though at a very nominal price and that too upon fulfilment of the criteria as specified in the scheme circular. Hence, it cannot be said that the said goods are being given as gift and therefore restriction of availment of input tax credit under clause (h) of Sub-section (5) of section 17 shall not be applicable in respect of the said goods. - Case Number 12 of 2021 - - - Dated:- 30-9-2021 - MR. BRAJESH KUMAR SINGH, AND MR. JOYJIT BANIK, ME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditioner for ₹ 50 only against purchase of 1300 boxes of hosiery goods. 1.4 The applicant has made this application under sub-section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01: (1) Whether the supply of goods such as gold coins, refrigerator, mixer grinder, cooler, split air conditioner, etc. at nominal price to retailers against purchase of specified units of hosiery goods pursuant to a promotional scheme would qualify as individual supplies taxable at the rates applicable to each of such goods as per section 9 of the CGST Act or mixed supply taxable at the highest GST rate as per Section 2(74) read with section 8 (b) of the CGST Act, 2017, in light of the fact that the hosiery goods and good being sold at nominal price are sold under separate invoices with separate prices. (2) Whether credit of the input tax paid on the items being sold at nominal prices (as indicated above) would be available to the applicant. 1.5 The aforesaid question on which the advance ruling is sought for is found to be covered under clause (a) and (d) of sub-section (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be provided by the applicant on the said goods may qualify the same as gifts and hence deny credit of the same. 2.4 The applicant further apprehends that in the alternative, the tax authorities may also try and classify the supply of the said goods and the hosiery goods as mixed supply in accordance with section 2(74) read with section 8 (b) of the CGST Act, 2017. 2.5 Section 2(74) and 8(b) of the CGST Act reads as below: (74) mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration . - A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately; Section 8 (b) of the CGST Act, reads as below: 8. Tax liability on composite and mixed supplies. - The tax liability on a composite or a mixed supply sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be met for a supply to be characterized as mixed supply . Fulfillment of any one or two conditions will not be sufficient for characterizing a supply as mixed supply . 2.11 The applicant submits that perse, none of the parameters as discussed above are met in the present case. The first condition is that there has to be two or more supplies which are made in conjunction to each other. Hence, in the facts of the present case, it has to be first ascertained whether the supply of hosiery goods and the supply of said goods can be said to have been made in conjunction with each other or not. 2.12 The applicant submits that in the present case, the supply of hosiery goods and the supply of the said goods would not be made in conjunction with each other. Rather as per the proposed retail scheme circular, supply of the said goods would be contingent upon the supply of hosiery goods. In other words, it is not necessary that the supply of hosiery goods would ipso facto entail a supply of the said goods. It is only when the retailers meet the prescribed criteria as would be stipulated in the proposed retail scheme circular, the supply of said goods would take place. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the supply should not qualify as a composite supply . Composite supply is defined under Section 2(30) of the GST Act to mean supply of two or more taxable supplies which are made in conjunction to each to each other and are naturally bundled in the course of business and one of the supplies is a principal supply. The applicant submits that as the supply of hosiery goods and the supply of the said goods would not be made in conjunction with each other and would not be naturally bundled in the ordinary course of business, the supply of hosiery goods and the supply of the said goods would not qualify as a composite supply . 2.17 The applicant submits that although one of the conditions of qualifying as a mixed supply may seem to be met in the present case, but the other two conditions, i.e., supply to me made in conjunction with each other and that the same has to be made for a single price would indisputably not be satisfied. The applicant therefore submits that once the parameters for qualifying as mixed supply under Section 2(74) are not met, the supply of hosiery goods and the supply of said goods which are disjointed and unconnected cannot be characterized as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osiery goods. The primary activity of the applicant is the sale of hosiery goods and to boost the sale of the same and to have a competitive edge over its competitors, the applicant would provide the said goods to those retailers who meet the criteria as would be prescribed under the retail scheme circular. So, the provision of providing said goods under the retail scheme circular would undoubtedly qualify as an activity which is incidental and undertaken in the course or furtherance of business. 2.23 The applicant submits that the question as to what activity qualifies as incidental or ancillary activity for the purpose of conducting business has come up for consideration in various cases. Reference in this regard is placed on the judgment of the Hon ble Supreme Court in the case State of Tamil Nadu v Binny Ltd, Madras, (1982) 49 STC 17 (SC) wherein the issue was whether running of a textile store by the owner of a textile factory for the purposes of its employees would qualify as an activity incidental to the carrying of the business. The Hon ble Supreme Court in this regard observed that: 3 All that the statute requires is that the work should not be irrelevant to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Property Act, 1882 held that gift means . to mean the transfer of certain existing movable or immovable property made voluntarily and without consideration 2.28 The applicant therefore submits that the sine qua non for something to qualify as gift is that no consideration can be attached to the same. Gift is something which is given completely out of one s volition and without any concomitant charge. The applicant intends to provide the said goods to the retailers at a certain consideration. For instance, if the retailers meet the criteria as prescribed in the proposed retail scheme circular, then the applicant would provide an air-conditioner for INR 50. Hence, the provision of said goods will not be completely free of cost. The applicant would be charging a nominal consideration for the same and hence it cannot be said that the said goods are being given as gift . 2.29 The applicant submits that Section 17(5)(h) seeks to restrict credit on goods when given as gift . It does not prescribe or stipulate that even if any goods is given at a nominal or discounted rate, the same would qualify as gift . The applicant submits further that there is no provision under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not made for a single price; (iii) do not constitute a composite supply. 4.4 It is admitted that mixed supply and composite supply are mutually exclusive thereby conditions as defined under clause (30) of section 2 of the GST Act in respect of composite supply must not be present in a supply so as to qualify for mixed supply. The applicant further contended that the supply shall not be treated as composite supply . We find that a supply made by a taxable person shall satisfy the following conditions so as to regard it as composite supply: (i) Supply should consist of two or more taxable supplies of goods or services or both; (ii) Supplies should be naturally bundled and supplied in conjunction with each other in the ordinary course of business; (iii) One of the supplies should be principal supply. 4.5 It has been submitted by the applicant that under the promotional scheme, the hosiery goods would be sold first on a separate invoice and once the retailer would met the eligibility criteria, the goods specified in the scheme would be supplied to the said retailer vide a separate invoice. So, the supply of hosiery goods followed by the supply of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ift since gift is something which is given completely out of one s volition and without any concomitant charge. In the instant case, the applicant intends to provide the said goods to the retailers at a certain consideration, though at a very nominal price and that too upon fulfilment of the criteria as specified in the scheme circular. Hence, it cannot be said that the said goods are being given as gift and therefore restriction of availment of input tax credit under clause (h) of Sub-section (5) of section 17 shall not be applicable in respect of the said goods. 4.11 In the case in our hand, a nominal value shall be assigned to the goods under promotional scheme. So, the same shall not be supplied free of cost and therefore cannot be termed as gift . However, we are of the view that in the given scenario, the value of the said goods shall be required to be determined as per provision of section 15 read with rule 27 of the CGST/ WBGST Rules, 2017 as we find that here price is not the sole consideration for the supply. 4.12 Sub-section (1) of section 15 of the GST Act reads as under: (1) The value of a supply of goods or services or both shall be the transaction val ..... X X X X Extracts X X X X X X X X Extracts X X X X
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