The Authority of Advance Ruling (AAR), Uttar Pradesh held that the service received for the promotional scheme does not qualify for the ITC.
The Applicant, M/s Rodec Pharmaceuticals Private Limited, does the business of Trading Animal Health Products. The product groups are categorized into Antibiotic, Anthelmintic, and Analgesic & Antipyretic, Anti-Spasmodic, Ectoparasiticide, Feed Supplement, and Progesterone which were both taxable and exempted under the GST Act.
For expanding the company’s market share they have incorporated some sales promotional offers to increase the sales of their products in the name of “BUMPER OFFER, WINTER BONANZA” in which they provide some no-cost extra products (like lunch boxes, sandwich makers, etc) including the purchases.
The petitioner mentioned that the promotional things distributed to retailers are to be treated as inputs/input services used in the furtherance of business and the promotional materials are not gifts and are not covered under Section 17(5)(h) of the CGST Act, 2017.
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The promotional things are provided to the retailers via the petitioner of their own will without recognizing money. The goods provided beneath the promotional policy are not similar to the discounts on the products but would be similar to the personal consumables and entitled as gifts.
The goods would be provided in the completion of the conditions of the scheme with no separate consideration hence the goods and services distribution to the retailers under the scheme would not be the supply as mentioned under Section 7 of the CGST Act. Section 17(5)(h) limits Input tax credit on gifts even if they would not obtain to run their business.
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A Coram of Shri Rajendra, Kumar member (Central Tax ) and Shri Vivek Arya, member (State Tax) said that “that the applicant is engaged in the business of trading animal health products and not in the business of the provision of food or catering. Even if the provision of food and catering had been in the course of furtherance of business, the applicant is not entitled to the input tax credit in light of the express bar provided under Section 17(5)(b)(i) of the CGST Act, 2017.”
