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2021 (10) TMI 326 - AAR - GSTClassification of supply - mixed supply or not - Supply of goods such as gold coins, refrigerator, mixer grinder, cooler, split air conditioner, etc. at nominal price to retailers against purchase of specified units of hosiery goods pursuant to a promotional scheme - individual supplies taxable at the rates applicable to each of such goods as per section 9 of the CGST Act or mixed supply taxable at the highest GST rate? - hosiery goods and good being sold at nominal price are sold under separate invoices with separate prices - input tax paid on the items being sold at nominal prices. Determination of nature of supply - HELD THAT - The supply of hosiery goods followed by the supply of goods under promotional scheme shall not take place for a single price. As the supply of the aforesaid two items shall be made for different prices, it doesn t satisfy the condition of being made for a single price and the supplies, therefore, cannot be regarded as mixed supply. Whether the supply involved in the instant case can be termed as composite supply? - HELD THAT - The supply shall not fall under the category of composite supply since supply of hosiery goods and goods under promotional scheme cannot be considered as naturally bundled and supplied in conjunction with each other in the ordinary course of business - the supply of hosiery goods and goods under promotional scheme are separate supply and tax on the supply shall be levied at the rate of each such item as notified by the Government. Admissibility of input tax credit on the items intended to be supplied by the applicant at a nominal rate under promotional scheme - HELD THAT - In the instant case, the applicant intends to provide the said goods to the retailers at a certain consideration, though at a very nominal price and that too upon fulfilment of the criteria as specified in the scheme circular. Hence, it cannot be said that the said goods are being given as gift and therefore restriction of availment of input tax credit under clause (h) of Sub-section (5) of section 17 shall not be applicable in respect of the said goods.
Issues Involved:
1. Determination of nature of supply. 2. Admissibility of input tax credit. Detailed Analysis: 1. Determination of Nature of Supply: The applicant intends to manufacture and supply hosiery goods and proposes a promotional scheme where retailers can purchase items like gold coins, refrigerators, coolers, split air conditioners, etc., at a nominal price upon buying a specified quantity of hosiery goods. The key question is whether these transactions constitute individual supplies or a mixed supply under Section 2(74) read with Section 8(b) of the CGST Act, 2017. The applicant contends that the supply of hosiery goods and promotional items should not be classified as a mixed supply because: - The supplies are not made in conjunction with each other. - They are not made for a single price. - They do not constitute a composite supply. The Authority agrees with the applicant, noting that: - Mixed supply requires two or more individual supplies made for a single price, which is not the case here as separate invoices are issued for each supply. - Composite supply requires the supplies to be naturally bundled and supplied in conjunction with each other, which is also not applicable here. Therefore, the supply of hosiery goods and promotional items are considered separate supplies, and tax will be levied at the rate applicable to each item as notified by the Government. 2. Admissibility of Input Tax Credit: The applicant seeks to avail input tax credit on items sold at nominal prices under the promotional scheme. Section 16 of the GST Act entitles a registered person to take credit of input tax charged on any supply of goods or services used in the course or furtherance of business. The applicant argues that the promotional scheme is intended to boost sales, qualifying it as an activity undertaken in the course or furtherance of business. However, Section 17(5)(h) of the GST Act restricts input tax credit on goods disposed of by way of gift or free samples. The applicant contends that the promotional items are not gifts since they are sold at a nominal price and not given voluntarily without consideration. The Authority agrees, stating that since the goods are sold for a consideration, even if nominal, they do not qualify as gifts, and the restriction under Section 17(5)(h) does not apply. The value of the promotional items must be determined as per Section 15 read with Rule 27 of the CGST/WBGST Rules, 2017, as price is not the sole consideration for the supply. Ruling: 1. Supply of goods at nominal price to retailers against purchase of specified units of hosiery goods pursuant to a promotional scheme would qualify as individual supplies taxable at the rates applicable to each of such goods as per Section 9 of the GST Act. 2. Credit of the input tax paid on the items being sold at nominal prices would be available to the applicant.
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