Admissibility of ITC on procurement of inputs/ input services used for promotional scheme – AAR Tamil Nadu
by ReinHeads Team | Nov 15, 2021
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AAR Tamil Nadu- Admissibility of ITC on procurement of inputs/ input services used for promotional scheme
- GRB Dairy Foods Pvt. Ltd. (‘the Applicant’) is engaged in the business of manufacture and supply of ghee and other products
- The products supplied by the Applicant are taxable under the Act and the products are neither “Exempted” nor “Nil rated”
- The Applicant launched a sales promotion scheme titled ‘Buy n Fly’ wherein based on the quantity and value of products purchased by the retailers, they are awarded certain rewards as per the scheme such as trip to Dubai, gold voucher, television and air-cooler etc.
- The Applicant submitted that they are eligible to claim Input Tax Credit (‘ITC’) in respect of procurement of inputs and inputs services, used for their ‘Buy n Fly’ scheme in the course of business carried on by the Applicant
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| Issues before the Authority for Advance Ruling (‘AAR’) |
| Whether GST paid on inputs/input services procured by the Applicant to implement the promotional scheme under the name ‘Buy n Fly’ is eligible for ITC under the GST law in terms of Section 16 read with Section 17 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’)? |
| Discussion & Ruling |
The AAR ruled that the GST paid on inputs/input services procured by the Applicant to implement the promotional scheme under the name ‘Buy n Fly’ is not eligible for ITC under Section 17(5)(g) and (h) of the CGST Act on account of the following reasons:
- Rewards under the promotional scheme are supplied in the course of business and thereby the condition of Section 16 is fulfilled
- Section 17(5)(g) of the CGST Act specifically restricts the ITC of the goods/ services used for personal consumption. Rewards are consumed by the retailer for their personal consumption and hence such ITC is restricted under Section 17(5)(g) of the CGST Act
- Section17(5)(h) of the CGST Act expressly restricts ITC on such gifts, even if they are procured in the course of furtherance of business. Rewards under the promotional scheme are gifts and hence are not eligible ITC under Section17(5)(h) of the CGST
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A copy of the Ruling is attached herewith.
*Advance Ruling No. 36/ARA/2021 dated 30 September 2021 (The Authority for Advance Ruling, Tamil Nadu) |
