The Tamil Nadu Appellate Authority for Advance Ruling (AAAR) has affirmed the observations of Tamil Nadu AAR and held that ITC of GST paid on procurement of goods/services for the promotional scheme is not available as per Section 17(5) of the CGST Act. The AAAR elucidated that since the retailers ultimately consumed the goods/services provided under the reward scheme, such personal consumption by appellant or by its retailers would disentitle them to avail ITC. Hence, the contention regarding applicability of clause to the stage of procurement use and not on the last use would be of no avail to the appellant. The AAAR has emphasised upon the non-obstante clauses of Section 17(5) and remarked that these clauses put embargo on availability of ITC itself. The AAAR concluded that giving away of goods/services under the scheme is not a supply. Therefore, ITC of the GST paid on the goods/services procured for the scheme is not available to the appellant.
Our comments
Similar
to the present ruling, the Karnataka AAAR in case of Page Industries Limited
had held that ITC of GST paid on procurement of promotional items supplied free
of charge is not available as the said supply is a non-taxable supply.
Even,
the Maharashtra AAR in case of Biostadt India Limited had held that ITC would
not be available on goods given as ‘gifts’ when no GST is paid on their
disposal.
However,
contrary to these rulings, the Bombay High Court in case of Coca Cola India Pvt
Ltd. under the erstwhile regime, had allowed the input credit of service tax
paid on advertising, sales promotion, etc.
As
per the industry practice, many companies offer promotional gifts/ incentives
by way of discounts, free gifts, etc. to dealers / distributors /retailers to
incentivise. However, it seems that the present ruling is not in line with the
intention of the law to allow ITC on sale promotion related expenses which are
incurred in the course or furtherance of business.
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