Sales Promotion item is taxable supply at Value u/r 27
KANAHIYA REALTY PRIVATE LIMITED
The supply of hosiery goods followed by the supply of goods under promotional scheme doesn’t satisfy the condition of being ‘made for a single price’ and the supplies, therefore, cannot be regarded as mixed supply
– further, the said supply shall not fall under the category of ‘composite supply’ as they are not naturally bundled and supplied in conjunction with each other in the ordinary course of business
– supply of hosiery goods and goods under promotional scheme are separate supply and tax on the supply shall be levied at the rate of each such item as notified by the Government
– the applicant intends to provide the goods under promotional scheme to the retailers at a certain consideration, though at a very nominal price and that too upon fulfilment of the criteria as specified in the scheme, Hence, it cannot be said that the said goods are being given as ‘gift’
– the value of the goods supplied under sales promotion scheme shall be required to be determined as per provision of section 15 r/w rule 27 of the CGST Rules as in the instant case, price is not the sole consideration for the supply.
ITC on Sales Promotional Items
GRB DAIRY FOODS PVT LTD – Tamil Nadu AAR
Purchase of goods/services (like TV, refrigerators, etc) procured for disbursement in a Promotional scheme to the retailers for their personal consumption are for furtherance of business and condition u/s 16 is fiulfilled
However the goods/services for personal consumption are restricted under Section 17(5)(g) of the CGST Act – 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 –
Distribution of goods and services to the retailers as per the Scheme is not a ‘Supply’ as defined under Section 7 of the GST Act
Therefore, the tax paid on the goods/services procured for distribution as rewards extended in the scheme is not available as ITC as such rewards have been extended as gifts.
Most Litigative Issues on ITC
Critical Provisions for Denial of ITC/Payment of Tax
In re Page Industries Limited (GST AAR Karnataka)
1. Sales promotion items are ‘non-taxable/ exempt supplies’ on which no ITC is available u/s 17(2) of The CGST Act
2. Since sales promotion items are supplied voluntarily they are ‘gifts’ and ITC is blocked u/s 17(5)(h)
3. They are business assets and hence they are supplies in terms of Schedule I entry 1 “Permanent transfer/disposal of business assets where ITC has been availed on those assets”
Critical Provisions for allowance of ITC/Non-Payment of Tax
1. They are not outward supply at all as they are not transferred/disposed off for a consideration.
2. They are not business assets. They are not purchased for generating future economic cash flows.
3. They are not ‘gifts’ as there is a business purpose for the expenditure. The expenditure is incurred to promote/generate sales. They are not voluntary but incurred due to market requirement to generate demand.
4. They are at best moveable property for distribution and increasing sales.
5. They are business expenditure like any other expenditure which are for furtherance of business.
Other Such Transactions
1. ‘Buy More Save More’ Offers
2. ‘Buy One Get two’ Offers
3. Commercial Credit Notes
Author Bio
‘MOST LITIGATIVE ISSUES…………” –
It is seen from the AAR Ruling in re. Page Industries Ltd., (Report @ https://taxguru.in/goods-and-service-tax/itc-promotional-material-given-franchisees-retailers.html ) the limited point(s) of dispute has(ve) been discussed and decided,- simplistically so,- having regard to only what the legislated provisions , in terms, say. To be precise, what has been grossly oversighted /impudently ignored is that, – going by the well accepted and firmly settled rule/ principle (of interpretation) the three crucial concepts of ‘INPUT’, ‘OUTPUT’ and ‘ITC’ of relevance have to be strictly construed in their ordinary dictionary meaning , as clearly envisaged in commercial parlance.
In short, such and all other so called ‘issues’ , being routinely taken up and pursued relentlessly are nothing but ‘non-issues’ ; as such, are not at all ‘litigable’ / ‘litigative’.
Premised so, the power of the AAR to entertain and give a RULING in such matters is highly questionable / hotly contestable.