ITC not allowed on goods/services procured for distribution of sales promotion rewards for achieving sales target.
Facts of the Case
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 none of the products are either “Exempted” or “Nil rated”.
With the objective of expanding the market share, the applicant launched a sales promotional offer to enhance sales of its products named as ‘Buy n Ply’ scheme.
Retailers are granted rewards like a trip to Dubai, gold voucher, television and air-cooler based on quantity and value of products purchased by them from applicant’s distributors and sub-stockiest.
Matter in question
Applicant contended that Input Tax Credit is available on the procurement of input goods and services to be later granted as rewards to the Retailers since these are being used in the course of the business and have direct nexus with the business being carried on. Hence, according to the applicant, he is eligible to claim the input tax credit of the same.
Observations and Findings of the Appellate
Promotional rewards were extended by applicant at its own free will voluntarily without any consideration in money or money’s worth on achievement of a set target to retailers.
Rewards are not in nature of discounts to products but are in nature of consumables for personal consumption and qualify to be termed as gifts.
No tax invoice/any taxation document is raised for such rewards.
Distribution of goods and services to retailers as per scheme is not a ‘Supply’ as defined under section 7 of The CGST Act.
Ruling
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 Input Tax Credit under the GST law in terms of Section 17(5 (g) and (h) of the CGST Act, 2017 and TNGST Act, 2017.
