Extra packets of cigarettes distributed under sales promotion scheme of ‘buy one get one free’ not subject to GST – AAR Uttar Pradesh
by ReinHeads Team | Apr 6, 2022
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AAR Uttar Pradesh – Extra packs of cigarettes distributed under sales promotion scheme of ‘buy one get one free’ not subject to GST
- Golden Tobie Pvt Ltd (‘the Applicant’) is engaged in the business of manufacturing, marketing and distributing cigarettes in India and abroad
- The Applicant introduced a promotional scheme wherein extra packs of cigarettes would be supplied to the distributors in addition to regular supply without any additional consideration in respect of the extra packs of cigarettes
- Illustration to explain : The Applicant would be receiving an order for supply of 100 packs of cigarette to distributor at price of INR 100 per pack of cigarette and thereby the total taxable value would be INR 10,000. As a sales promotion scheme, the Applicant would supply 130 packs of cigarette against the same taxable value of INR 10,000. Accordingly, the Applicant would raise a tax invoice of INR 10,000 plus applicable GST and Cess
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| Issues before the Authority for Advance Ruling (‘the AAR’) |
- Whether the extra packs of cigarettes would again be leviable to GST?
- If the extra packs of cigarettes would again be leviable to GST, what taxable value would be attributed to such extra packs for levy of GST?
- Whether the extra packs would be considered as exempt supplies or free samples and hence attract the provisions of Section 17(2) of Uttar Pradesh Goods and Services Act 2017 (‘UPGST Act’) or clause (h) of Section 17(5) of the UPGST Act
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| Discussion & Ruling |
The AAR held that GST would not be levied on extra packs of cigarettes on account of the following key reasons:
- Circular No. 92/11/2019-GST dated 07 March 2019 has clarified two points in respect of the treatment of sales promotion schemes specifically ‘Buy one get one free’ –
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- It is not an individual supply of free goods but a case of two or more individual supplies where a single price is charged for the entire supply. Such schemes should be treated as supplying of two goods for the price of one
- ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to supply of goods as part of such offers
- Extra packs of cigarettes are not exempt supplies or free samples and hence will not attract the provisions of Section 17(2) of the UPGST Act or clause (h) of Section 17(5) of the UPGST Act
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*Order of Authority for Advance Ruling No. UP ADRG 84/2021 dated 18 October 2021 (The Authority for Advance Ruling, Uttar Pradesh) |
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