In re Biostadt India Limited (GST AAR Maharashtra)
Question :- The question or issue before Your Honor for determination is whether Input Tax Credit (“ITC”) can be claimed by the applicant on procurement of Gold coins which are to be distributed to the customers at the end of scheme period for achieving the stipulated lifting or payment criteria?
One of the contention of the applicant that they have a contractual arrangement with the customer wherein if the distributor purchases certain amount of company’s product or makes payment in a prescribed manner, then he shall be entitled to a gold coin of specific weight. This can be inferred as if the distributor of the applicant is providing services of increased sale for which consideration is in the form of a gold coin. As per Section 7 of the CGST Act, disposal, or the case may be, barter, made or agreed to be made for a consideration in the course or furtherance of business is supply liable to tax. We find in the present application, the applicant has not shown proof of payment of output tax. The only conclusion that can be drawn in the present case is that the distribution of gold coins by the applicant is not but gifts and hence the transaction is covered by the provisions of Section 17(5) of the Act.
To sum up ITC on “gifts” will not be available when no GST is being paid on their disposal. Just because the applicant submits that they have satisfied Section 16 (1) of the CGST Act 2017 does not mean that they are entitled to credit since Section 17(5) starts with “Notwithstanding anything contained in sub-section (1) of Section 16 . The implication is that in the subject case even if it seems, as per the applicant, that Section 16 (1) is applicable in their case and allows them credit, Section 17(5) shall block such credits.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING,MAHARASHTRA
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by BIOSTADT INDIA LIMITED, the applicant, seeking an advance ruling in respect of the following questions.
1:1. The question or issue before Your Honor for determination is whether Input Tax Credit (“ITC”) can be claimed by the applicant on procurement of Gold coins which are to be distributed to the customers at the end of scheme period for achieving the stipulated lifting or payment criteria?
1.2. The question or issue before Your Honor is not restricted to the said scheme only. The applicant notifies schemes with similar conditions periodically. So whether the ITC can be claimed in all such similar schemes.
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the “GST Act”.
FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions, as reproduced verbatim, could be seen thus-
STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH THE ADVANCE RULING IS SOUGHT
1. This Application is being filed by M/s. Biostadt India Limited (‘the Applicant’/the Company’). The Applicant, having Good and Service Tax (GST’) Registration No. 27AACCB1830G123 is inter alia engaged in the business of developing, manufacturing and distributing crop protection chemicals and hybrid seeds.
2 Biostadt India Limited has been serving the farming community for over three decades. The company provides a helping hand to the farmers by providing them with top-of-the-line agricultural inputs and services.
3. Over a period of time, the applicant has diversified into a range of seaweed-based biotechnological inputs using fermentation technology, under the well-known brand ‘Biozyme’. They also deal in crop protection chemicals – insecticides and pesticides and has made its foray in hybrid seeds market.
4. The manufacturing facilities of the applicant are multi-locational and are very well-equipped with state-of-the-art technology and testing equipment which produce quality products.
5. In order to ensure availability of various products and services, the applicant has extensive network which includes 3 mother depots, 22 stock points and a network of more than 2000 distributors and above 25000 retailers across the country. Such a closely held network of distributors and retailers has constantly helped the company in achieving their long-term vision and mission.
6. It is a well proven fact that the channel of distribution plays a pivotal role in achieving the marketing objectives of the company. In order to achieve sales and marketing objectives; the applicant has launched various target based – sales incentive schemes for their distributors and etailers (customers). These schemes help the customers to be motivated to achieve a specified target and in turn helps the company to achieve their targets.
7. The applicant has PAN-India presence and has operations spread out in more than 15 states. The applicant was erstwhile registered under Central Excise law, Service tax legislation and respective state Value Added Tax laws and now is registered under Good and Service Tax (GST).
8. This Application is being filed by M/s. Biostadt India Limited which inter-alia has launched a new les promotion scheme namely the “Kharif Gold Scheme 2018” for their customers. The said sales promotion scheme helps the company in achieving their sales and collection targets.
The terms and conditions of the scheme are as under:
a. The said scheme will be in force for the period June 2018 to August 2018.
b. The scheme is divided into two parts:
Lifting of products:
Customers who purchase the below mentioned products on or above their below mentioned quantity shall be entitled to one 10 gams Gold coin. The products that need to be lifted during the scheme are as under:
