TMI Blog2021 (10) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 17(5)(g) above, restricts the ITC on the goods/services procured for personal consumption, even if those goods/services are procured in the furtherance of business. 'Personal Consumption' is not defined in the GST Law - the claim that the cost of these goods/services are accounted under sales promotion account, the expenses under which are considered to arrive at the cost of the product is immaterial and the argument does not hold, in as much as the credit of taxes paid on the goods/services for personal consumption is explicitly restricted. The fact of who pays for the goods and services here is irrelevant to the usage of the said goods and services. The goods and services are used by the retailers and hence are for personal consumption and the applicant is ineligible to take input tax credit on the inward supply of these goods/services. The input goods/services in the form of Trip to Dubai, Gold voucher, Televisions, Air coolers procured by the applicant for the intended use in furtherance of their business and distributed to the retailers under the 'Buy N Fly' scheme, are goods/services which are in the nature of gifts for personal consumption of the rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arnataka having separate GST registration in both the States. The product groups of the applicant are classified into ghee, masalas, instant mixes and sweets. The products supplied by them are taxable under the Act and none of the products are either Exempted or Nil rated . They sell their products through various retail stores across the country and obtain substantial revenue from Export Sales too. With the objective of expanding the market share', the applicant launched a sales promotional offer to enhance sales of its products. The sales promotional offer was named as 'Buy n Fly' scheme. The scheme was valid from 8th April 2019 to 8lh July 2019. This scheme is applicable for sales of Instant Mix, Masalas, ready to eat sweets and snacks. In other words, based on the quantity and value purchases made by retailers from sub stockists, the rewards fixed under the scheme would be awarded by the company to retailers. The supply chain of the applicant is as follows: Manufacturer (ORB)---- Super stockist ---- Sub stockist (Wholesaler) ---- Retailer. 2.2 The applicant has stated that as per the scheme the retailers have to purchase the eligible products from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able for Masalas, Instant Mixes, Sweets, Town bus, snacks only (CTC is excluded) 50% bill value should be of masalas. Any disputes are subjected to Hosur (Tamil Nadu) jurisdiction only. As per the scheme the targets and/slabs are as below: Turnover Criteria ₹ 1,50,000 ₹ 1,00,000 ₹ 50,000 ₹ 25,000 Rewards/product 'Trip to Dubai Gold Voucher Television Air Cooler Further, they have stated that they had informed their super-stockiest, sub stockiest and retailers about the scheme prior to its launch. As per the scheme and the slabs mentioned supra, the reward articles will be handed over by the applicant to those retailers who achieve the target. Once the claims are submitted by the retailers, it will be scrutinized and eligible retailers under the scheme will be identified. The applicant has furnished the sample copies of the communication letter from the applicant to eligible retail outlets. The applicant has stated that they have procured these goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant has stated that their products are taxable at 12%, 18% and 5% under the GST law (the Act). None of the company's products are 'exempted' or 'nil-rated.' To augment its sales, the company had launched a sales promotion scheme titled 'Buy n Fly' wherein based on the quantity and value of products purchased by the retailers, they are awarded certain rewards as per the scheme. They have submitted that they are eligible to claim input tax credit in respect of procurement of inputs and inputs services, being Trip to Dubai, Gold voucher, Television and Air-cooler. It is submitted that the' applicant procures these goods and services in the course of business and it has direct nexus with the business carried on by the company. It is submitted that marketing and business expansion is an indispensable activity of every company's operations and 'Buy n Fly' scheme is a sales promotion scheme which was launched to promote the sales of GRB brand Instant mix, Masalas, ready to eat sweets and snacks. They have stated that the Trip to Dubai voucher, Gold voucher, Television and Air cooler procured by the company will be used in its business or in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Clause (h) of the said sub section draws attention under the present case which specifies that credit shall not be eligible in case of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Considering this context, they have submitted that rewards such as Dubai Trip voucher, Gold voucher, TV and Air-cooler handed over to eligible retail outlets shall not fall under clause (h). Clause (h) deals with goods disposed of by way of gift' which cannot be equated to 'rewards'. Since, the term 'Gift' has not been defined under the CGST Act, 2017 they have referred to other enactments and judicial pronouncements in order to ascertain the meaning of the term gift'. The term Gift' under Gift Tax Act, 1958 was defined as,- '(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' As per Black's Laws Dictionary (Fourth edition): A voluntary transfer of personal property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is neither a requirement of continuity nor frequency of such activities or transactions for them to be regarded as 'business'. The law poses no restriction that the goods must be used on the shop floor, or that they must be supplied as such/ as part of other goods/ services. It would be sufficient if the goods are used in the course of business, of for furthering the business. The term 'course of business' is one that can be stretched beyond the boundaries consolidating activities that have direct nexus to outward supply. What is usually done in the ordinary routine of a business by its management is said to be done in the course of business . Furtherance of business is a new term, and an entirely new concept, that has been introduced in GST. Additionally, there is no other condition attached to the term input , especially in relation to the outward supply. Further, the law provides a flexibility for this purpose by inserting the words or intended to be used before 'in the course .... . By this, the law secures the meaning of the term input even for cases where goods have been purchased but, are yet to be used in the business. Thus, the conditions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sement and Sales Promotion Cost; Head Office and Regional Office Overheads ; Distributor Margin ; Profit Margin.; all these elements form the basis of fixation of the MRP. From the above it is evident that the price of the product has an clement of the Advertisement and Sales Promotion Cost included and hence the consideration for the product on which GST is discharged has this element inbuilt. ii. the objective behind running any Sales Promotion Campaign are as under: Keeping Sales Volume at the same levels or achieve incremental volumes ; Pushing sales volume at the expense of the Competitors by encouraging dealers to move their product's ; Giving Customers a taste of their Products which helps to sustain or increase Sales Volumes and Values. iii. The applicant has submitted that the Sales Promotion Expenses incurred are pursuant to a contractual obligation. The consideration which is paid for the product includes the element of the Sales Promotion campaign costs and therefore the contractual obligation arising from running such campaigns has the element of consideration on which GST is being discharged. They have further stated that during the promotional camp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absence of any progress on the matter they availed the credit but have not utilized the same against the payment of Output Tax liability and the same is carried forward in Input Tax Credit Ledger. Further, in terms of Section 97 of the Central Goods and Services Tax Act and its corresponding provision under the State Goods and Services Tax Act the Advance Ruling authority is authorized to deal with questions relating to admissibility of input tax credit of tax paid or deemed to have been paid. The term used is admissibility of input tax credit of tax paid or deemed to have been paid and there is no specific exclusion relating to input tax credit of tax paid or availed. Hence, they have requested the authority to take cognizance of the above fact relating to the grounds on which the input tax credit was availed and their submissions. 3.4 The applicant was addressed vide letter dated 19.03.2021 to submit details of credit availed with documents as required during the hearing and the acknowledgement for online filing of their application. The applicant vide their letter dated 27.01.2021 submitted the acknowledgement dated 12.05.2020 for filing the online Advance ruling applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir manufactured products includes the sales promotional expenses. 4.1 The State Jurisdictional authority who has the administrative jurisdiction over the applicant vide his letter ROC.617/2020 dated 05.02.2021, has submitted the following remarks:- As per Section 17(5)h of TNGST Act 2017, input tax credit shall not be available in respect of goods lost, stolen, destroyed or written off or disposed off by way of gift or free samples. Hence, as per the act the free gifts or rewards given without consideration even though they are given for sales promotion do not qualify as inputs, since no GST is paid on its disposal. Hence, the applicant is not eligible for availing ITC of the tax paid on purchase of those products. As per the CBIC Circular No.92/11/2019 dated 07.03.2019, only certain sales promotional schemes are eligible for ITC and it is clarified in the circular that ITC shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts/free samples distributed without any consideration. Since, the offers an' given voluntarily by the applicant on fulfillment of certain conditions these a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruling has been sought. When questioned on the fact of such availing, they submitted that the application for ruling was filed online on 12.05.2020 and physical copy of such application was filed with the registry on 19.10.2020. Credit was availed in order to avoid the same lapsing due to limitation of time for availment as the cut off date was 20.10.2020 and that the credit so availed has been lying utilized so far in their ledger. The State Jurisdictional Officer, in his verification report dated 13.08.2021 has stated that the applicant has filed the monthly return, GSTR 3B on 23.10.2020 and the applicant has availed credit for the goods purchased for the promotional scheme. The applicant has filed the application seeking the ruling on 19.10.2020 and as on the date of filing the application, there is no pending proceedings on the issue raised by the applicant (as reported by the jurisdictional authorities). Therefore, the application is found admissible under Section 97(2)(d) of the CGST Act 2017. 7.1 From the submissions, it is seen that, the applicant is engaged in the business of manufacture and supply of ghee and other products. They have floated a sales promotional offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s; that the scheme was a contractual obligation as the details of the scheme was circulated before launch; the price paid by the dealers/distributors for procurement of their products included the component of sales promotion expenses and therefore is the consideration for the rewards of the scheme procured by them on which ITC has been claimed; that the promotional materials are not gifts and are not covered under S.17(5)(h) of the GST Act; that there is no difference in MRP of their product pro scheme and there was an incremental supplies of almost 24% during the period of the scheme; that therefore the ITC is available to them on such inputs/ input services. 7.3 The eligibility to credit are governed by the provisions of Section 16 and Section 17 of the CGST Act. The relevant provisions are examined as under:- 16. (1) Every registered person shall, subject to such conditions and rest notions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The legal meaning of 'Personal' is 'pertaining to the person' and 'Consumption' is defined as The word Consumption cannot be understood in the limited sense of eating but in the wider sense of using-- C.Govindarajulu Naidu V. State of Madras AIR 1953 Mad 116'. The goods/services procured for disbursement in the scheme are Personal Air Coolers, LED TV, Dubai Trip for the persons and Gold Vouchers. These are distributed to the retailers for their personal consumption. The claim that the cost of these goods/services are accounted under sales promotion account, the expenses under which are considered to arrive at the cost of the product is immaterial and the argument docs not hold, in as much as the credit of taxes paid on the goods/services for personal consumption is explicitly restricted. The fact of who pays for the goods and services here is irrelevant to the usage of the said goods and services. The goods and services are used by the retailers and hence are for personal consumption and the applicant is ineligible to take input tax credit on the inward supply of these goods/services. 7.6 Further, as per Section 17 (5)(h), goods disposed of by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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