GST paid on promotion inputs/input services is not eligible for Input Tax Credit – Tamil Nadu AAR

GRB Dairy Foods Pvt. Ltd. [ORDER NO. 36/ARA/2021 (A.A.R. – GST – Tamil Nadu)]

Facts– The applicant is engaged in the business of manufacture and supply of ghee and other products and none of the products are either “Exempted” or “Nil rated”. the applicant launched a sales promotional offer was named as ‘Buy n Fly’ scheme to enhance sales of its products. The applicant submitted that they are eligible to claim input tax credit in respect of procurement of inputs and inputs services, being Trip to Dubai, Gold voucher, Television and Air-cooler and also the applicant procures these goods and services in the course of business and it has direct nexus with the business carried on by the company.

Held- The AAR after considering the situation held 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 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. Section 17(5)(g) restricts the ITC on the goods/services procured for personal consumption, even if those goods/services are procured in the furtherance of business. As per Section 17(5)(h), goods disposed of by way of gift are not eligible for ITC. The promotional rewards were extended by the applicant at their own will voluntarily without any consideration in money or money’s worth on achievement of a set target to the retailers. Hence, input tax credit of taxes paid on goods/services procured to be distributed as rewards is not available to them.

To read the complete judgment 2021 Taxo.online 1417