In re Goldmedal Electricals Pvt Ltd (GST AAR Maharashtra)
Summary : The Maharashtra Authority for Advance Ruling held that Goldmedal Electricals Pvt. Ltd. was not liable to discharge GST on reward goods transferred to dealers, retailers and others against redemption of points under its “Dhan Barse Scheme”. However, it denied input tax credit on the purchase of those goods because their distribution constituted gifts covered by section 17(5)(h) of the Central Goods and Services Tax Act, 2017 and the corresponding provisions of the Maharashtra Goods and Services Tax Act, 2017. The ruling therefore answered the output-tax question in the negative and separately rejected the ITC claim.
The applicant, engaged in electrical products including switches, wires, wiring devices, LED lights and appliances, introduced the scheme to strengthen relationships with dealers, retailers, electricians and counter boys. Dealers earned one Retailer Reward Point (RRP) for every ₹1,000 of invoice value, credited within 48 hours. Retailers received points on purchases from dealers, subject to a minimum dealer bill of ₹5,000. Transferring RRPs to retailers generated corresponding Dealer Reward Points (DRPs). The scheme also permitted dealers to transfer RRPs to the applicant at 0.25 DRP for each RRP, prohibited transfer of more than 30% of RRPs to a single retailer, and allowed revocation within three months in cases of returned goods or disputes. DRPs could be redeemed within 18 months through the app’s reward store or e-Mall. The applicant purchased reward goods from outside suppliers on payment of GST.
The applicant argued that reward points had no monetary value and their redemption did not constitute consideration under section 2(31). It issued delivery challans rather than tax invoices when transferring the reward goods and received no monetary consideration. Accordingly, it contended that the transfers were outside the scope of supply under section 7. For ITC, it relied on section 16, asserting that the purchases furthered its business and that it possessed tax invoices, received the goods, made payments to suppliers, and filed returns. It also referred to purchase orders, lorry receipts, goods receipt notes, e-way bills, GSTR-2A, payment records, GSTR-1 and GSTR-3B in support of compliance.
The applicant further submitted that the rewards were promotional expenditure incurred to increase sales and that their cost was embedded in the prices of its regular products. In its view, dealers and retailers earned the rewards by achieving sales targets, while acceptance of the app’s terms and conditions created enforceable contractual obligations. The goods therefore could not be treated as voluntary gifts. It cited decisions concerning business and input-service credit, including Coca Cola India (P) Ltd. v. CCE and CCE v. Ultratech Cements Limited, and referred to the United Kingdom First-tier Tribunal’s Marks & Spencer decision on allocating a package price across food and wine described as free.
The applicant also relied on Circular No. 92/11/2019-GST dated 7 March 2019. It drew analogies with “Buy One, Get One Free” offers, in which a single price covers multiple supplies, and “Buy more, save more” or volume-discount arrangements. It maintained that the circular supported ITC because reward costs formed part of the commercial price of its sales. The jurisdictional officer agreed that no GST was payable in the absence of consideration but opposed ITC under the blocked-credit provisions. A preliminary hearing took place on 25 January 2022; the first question was redrafted by letter dated 2 February 2022, and the final hearing was held on 24 September 2025.
The AAR found that participation in the scheme was discretionary and that the points merely identified persons entitled to rewards commensurate with their purchases. They did not constitute actionable claims or monetary or valuable consideration. The Authority referred to the scheme’s limitations on compensation and liability, the ability to change rewards with or without notice, and the applicant’s final authority over disputes. It held that the transfer of promotional goods against redemption of those points did not constitute supply under section 7.
On ITC, the AAR emphasised that section 17(5) begins with a non obstante clause and can block credit even where the general business-use requirement under section 16(1) is satisfied. It rejected the claim of a binding contractual obligation, observing that no signed contract conferring an actionable claim had been established and that the scheme’s criteria and terms were determined by the applicant. The goods were voluntarily given as rewards for loyalty and were therefore gifts. It relied on ARS Steels and Alloy International Private Limited v. State Tax Officer, decided by the Madras High Court on 24 October 2024, and In re Biostadt India Limited, Maharashtra AAR order dated 20 December 2018, concerning denial of ITC on promotional gifts.
The AAR distinguished the circular’s bundled-offer clarification because the applicant supplied electrical goods but separately procured cars, motorcycles, refrigerators and mobile phones for redemption. It also distinguished the clarification concerning post-sale discounts, which dealt with discounts in determining the sale price, whereas this application concerned ITC on articles distributed as gifts. The applicant’s other precedents were held to concern different facts and statutory provisions. The operative ruling consequently held that GST was not payable on the reward transfers, while ITC on the promotional goods given as rewards was unavailable.
Cases Discussed
- ARS Steels and Alloy International Private Limited v. State Tax Officer — 2024-VIL-1319-MAD; order dated 24 October 2024 (Madras High Court). Relied upon by the AAR for the statutory restriction on ITC on T-shirts and gold coins purchased for sales promotion.
- In re Biostadt India Limited — Order No. GST-ARA-72/2018-19/B-165, dated 20 December 2018 (GST AAR Maharashtra). Applied to hold that section 17(5) blocks ITC on gifts notwithstanding the general entitlement under section 16(1).
- Marks and Spencer PLC v. Revenue and Customs — [2018] UKFTT 238 (TC) (United Kingdom First-tier Tribunal, Tax Chamber). Cited by the applicant concerning allocation of a package price across food and wine promoted as free; the AAR did not adopt this analogy for the reward scheme.
- Arvinder Singh v. Lal Pathlabs (P) Ltd. — MANU/DE/0936/2015 (Delhi High Court). Listed among the applicant’s authorities; the AAR distinguished the applicant’s precedents collectively on facts and applicable law.
- CCE v. Ultratech Cements Limited — MANU/MH/1408/2010 (Bombay High Court). Cited by the applicant in support of its business-related credit submissions; distinguished collectively.
- Coca Cola India (P) Ltd. v. CCE — MANU/MH/0784/2009 (Bombay High Court). Cited by the applicant to support credit for expenditure connected with business promotion; distinguished collectively.
- State of Karnataka v. Shreyas Papers Pvt. Ltd. — Civil Appeal Nos. 3170–3173 of 2000, decided on 5 January 2006 (Supreme Court). Included in the applicant’s authorities; no separate application of its ratio was made by the AAR.
- State of Maharashtra v. Dr. Praful B. Desai — (2003) 4 SCC 601 (Supreme Court). Listed in the applicant’s submissions; no independent ruling on its relevance was recorded.
- Barendra Prasad Ray v. Income Tax Officer — AIR 1981 SC 1047 (Supreme Court). Listed among the applicant’s authorities in support of its interpretation of business-related entitlement.
- S. Mohan Lal v. R. Kondiah — (1979) 2 SCC 616; AIR 1979 SC 1132 (Supreme Court). Listed in the source as “Mohanlal v. R. Kondiah”; the source reproduces AIR 1981 SC 1047 against this separate case.
- Mazagaon Dock Ltd. v. Commissioner of Income Tax and Excess Profits Tax — AIR 1958 SC 861 (Supreme Court). Listed in the applicant’s submissions concerning business; distinguished collectively.
- Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax — 1955 (1) SCR 952 (Supreme Court). Listed among the applicant’s authorities; the AAR did not apply it to override the GST blocked-credit provision.
