The Tamil Nadu Appellate Authority of Advance Ruling( AAAR ) ruled that inputs or input services procured for a promotional scheme of products are not qualified for ITC.
The appellant, M/s GRB Dairy Foods Pvt. Ltd is involved in the business of making and supplying ghee, masalas, instant mixes, and sweets. With the goal of expanding the market share, the appellant has incorporated a sales promotional offer buy and fly, to expand the product sales. According to the scheme the petitioner furnishes the rewards such as Dubai Trip, Gold Voucher, Television, and Air Cooler for those retailers whose target will be achieved.
The petitioner seeks an advance ruling on if the GST furnished on the inputs or input services procured via the petitioner to execute the promotional policy beneath the name Buy and fly is qualified for the ITC beneath GST law. AAR ruled that these input or input services are not qualified for ITC beneath GST law and the disappointed appellant came AAAR.
“The appellant submitted that AAR completely ignored the fact that there was a contractual obligation that was based on a scheme that was circulated to the trade-in in advance.”
After coming to the contractual obligation, the provided promotional materials cannot be treated as a gift. AAR sees that the promotional materials were said to be the gifts that were provided voluntarily and thus will come beneath eh provisions of section 17(5)(h) and therefore credit has to be restricted.
AAAR sees that the petitioner furnished the rewards through the method of goods and indeed foreign tours via furnishing valid air tickets and that is the cause they coined the reward policy as buying and fly. Hence what they furnished in the policy were the goods and services. The provisions of clause (h) said that the ITC will not be available for the goods lost, stolen, demolished, written off, or disposed of via gift or free samples. Hence this clause is only subjected to goods.
The division bench presided by Sri M. V. Choudary, Member (Centre), and Sri K. Phanindra Reddy, Member (State) ruled that under the provision of the CGST act more precisely section 17(5) of the act, the gifts or rewards provided excluding the acknowledgement despite they are provided for the sales promotion do not entitle as inputs for the objectives of Credit, since no GST is furnished upon its disposal. Hence we mentioned that the ITC on the inputs and the input services engaged in the goods and services used towards the goal of the reward is not available for the petitioner and as per that the ruling provided via the Advance Ruling Authority of Tamil Nadu needs no interruption and the appeal is dismissed.
