2026-VIL-181-AAR
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SGST Advance Ruling Authority

GST – Maharashtra AAR - Liability to pay GST on transfer of reward goods against redemption of reward points under a dealer incentive scheme - Applicant launched a scheme under which dealers and retailers earn reward points on purchases and redeem them through an app for goods such as mobile, refrigerator and television - The Applicant purchases these goods from suppliers and transfers them under delivery challan without issuing a tax invoice or realising any monetary consideration - Whether the Applicant is liable to discharge GST on supply of reward goods to dealers and retailers against redemption of points under the scheme - HELD - The scheme is a sales promotional scheme meant to promote sale of the Applicant's products and is not mandatory, as participation is left to the discretion of dealers and retailers. The reward points are not in the nature of an actionable claim. They are only a mechanism to identify the persons to be rewarded commensurate with their purchases - The scheme terms provide that the Applicant is not liable for compensation or damages, that rewards may change with or without notice, and that the Applicant's decision is final. No contract is signed that bestows an actionable claim on dealers and retailers. The goods are given voluntarily on fulfilment of criteria decided solely by the Applicant and are in the nature of gifts – The supply of promotional goods against redemption of reward points, cannot be said to be against any actionable claim or extinguishment of such claim against the applicant. As there is not monetary or valuable consideration in the transaction of supply of promotional goods, these transactions cannot be considered as supply under Section 7 of the CGST Act - The Applicant is not liable to discharge GST on transfer of reward goods against redemption of points – Ordered accordingly - Eligibility to input tax credit on promotional goods given as rewards against redemption of points - Blocked credit under Section 17(5)(h) of the CGST Act, 2017 - Applicant purchased goods from suppliers on which GST was charged and transferred them to dealers and retailers against redemption of reward points under its scheme - Whether the Applicant is eligible to avail input tax credit of tax charged by suppliers on goods subsequently given as rewards under the scheme - HELD - Section 17(5) begins with a non obstante clause. Even if Section 16(1) allows credit, Section 17(5)(h) blocks it in respect of goods disposed of by way of gift or free samples - The linking of reward points to the extent of purchases is an incentive scheme for promoting sales and brand loyalty, and the products are clearly in the nature of gifts. The Madras High Court has held that credit on goods purchased for sales promotional activity is not available under Section 17(5)(h) - The promotional goods that are transferred by the applicant to various persons against redemption of points under 'Dhan Barse Scheme' of the applicant, are 'gifts' and are covered by section 17(5)(h) of GST Act and not eligible for input tax credit.
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