No. F.16 (100)/Tax/CCT/14-15/716

SGST Advance Ruling Authority

GST – Karnataka AAR - Sections 2(31), 7, 16(1) and 17(5)(h) of the CGST Act, 2017 – Scope of Supply – Non-monetary value of Consideration - Marketing expenses incurred to promote brand – Distribution of gifts under Sales promotion Schemes - applicant distributes gold coins and white goods as part of various promotion schemes - Eligibility to Input Tax Credit on gold coins and white goods distributed to the dealers under various promotional schemes - Applicant contention that gold distribution of coins and white goods are incurred in the course or furtherance of business and same cannot be regarded as ‘gifts’ – HELD – applicant is supplying goods to its dealers as incentive for achieving the targets and the same is part of a scheme which the parties are in knowledge in advance - it is not supply of any quantity of gold/ white goods to any dealer, but a specified quantity determined as per the terms and conditions of the scheme. The quantity of gold / white goods to be supplied by applicant is arrived at from the specified quantum of sales and payment of sale consideration i.e., marketing targets achieved by the dealers – the achievement of marketing targets set by the applicant is an inducement from the dealer or non-monetary consideration paid by the dealers for the supply of gold / white goods by the applicant. Further since the transfer of gold / white goods from applicant to the dealers is made for a consideration, it is covered in the definition of ‘supply’, more so when the definition of supply is an inclusive one - Even if the same is not covered under the term consideration, the goods are permanently transferred to the dealers and input tax credit has been availed on such goods. The term “assets” would definitely include the “inventory” and since these goods are procured in the course of business, would be covered under the scope of “business assets” - entry 1 of the Schedule I would cover the activity of distribution of white goods or gold as incentive and hence would be treated as a supply of such goods as per clause (c) of Section 7(1) of the CGST Act - Given that the distribution of gold coins and white goods are treated as supplies and attracts the tax liability on such distribution, the input tax credit is not restricted under any of the provisions of Section 17 of the CGST Act – The applicant’s obligation to issue gold coins and white goods to the dealers/ customers upon achieving the stipulated lifting of the material/ purchase target during the scheme period would not be regarded as “goods disposed of by way of gift” and Input tax credit would not be restricted under the Section 17(5)(h) of the CGST Act, 2017 – Ordered accordingly

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