2022 (7) TMI 700 - AAAR - GST

Supply or not - activity of providing complimentary tickets by the appellant - proving of the complimentary tickets to related party as well - levy of tax on such complimentary tickets - input tax credit - HELD THAT - The argument by the appellant that on account of absence of consideration in such activity or transaction, the same should not fall within the territory of supply is well taken and therefore the activity of providing such free or complimentary tickets is not a supply as per the GST Act - However, it is important to note here that as per section 7 of the Act read with Schedule I any activity or transaction between the related person including employee shall be treated as supply even if the aspect of consideration is not there. So, where such complimentary tickets are being provided by the appellant to related person as defined in section 15 of the Act or to distinct person as defined in section 25 of the Act the same would fall within the ambit of supply even if there is no consideration. Input Tax Credit - HELD THAT - The appellant has tried to build upon the argument by deploying sub-section (5) of section 17 of the Act to argue that even though this transaction does not fall within the domain of supply but the availment of input tax credit cannot be denied. Here the appellant has conveniently missed the principle in relation to availment of ITC. Looking broadly at the scheme of things under the GST Act it can be deduced that the availment of ITC directly flows with the taxability of the outward supply. Where the output supply is either not taxable that is exempt or has been used or deployed for non-business purpose the Act does not provide for availment of ITC in relation to such supply - The expression exempt supply as defined under the Act means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply. So, the activity of providing complimentary tickets is an exempt supply, and therefore there shall be no availment of ITC in relation to same in accordance with sub-section (2) of section 17 of the Act. Thus, appellant would not be eligible to avail input tax credit in relation to such activity. But, where such activity or transaction is treated as supply on account of being provided by the appellant to a related person or a distinct person the appellant would be entitled to avail input tax credit for the same.

Summary

Issues Involved:
1. Taxability of Complimentary Tickets
2. Applicability of Section 7(1)(a) and 7(1)(d) of the CGST Act, 2017
3. Interpretation of the term "Consideration"
4. Eligibility for Input Tax Credit (ITC)
5. Right of Withdrawal of Application
6. Validity of the Ruling Pronounced Beyond the Prescribed Time Limit

Detailed Analysis:

1. Taxability of Complimentary Tickets
The primary question was whether the activity of providing complimentary tickets falls within the definition of "supply" under the Punjab GST Act, 2017/CGST Act, 2017, and whether the appellant would be required to pay tax on such complimentary tickets. The appellant argued that complimentary tickets are provided without any consideration as a goodwill gesture for the promotion of business, thus should not be treated as supply under section 7 of the Act.

2. Applicability of Section 7(1)(a) and 7(1)(d) of the CGST Act, 2017
The appellant contended that Section 7(1)(a) of the CGST Act, 2017 does not cover free supply. They argued that the definition of supply requires consideration, which is absent in the case of complimentary tickets. Furthermore, the appellant highlighted that Section 7(1)(d) was omitted post-amendment, making the application of this section irrelevant for complimentary tickets.

3. Interpretation of the Term "Consideration"
The definition of "consideration" under Section 2(31) of the CGST Act was examined. It was noted that consideration includes any payment in money or otherwise, in respect of, in response to, or for the inducement of the supply of goods or services. The appellant argued that there is no consideration flowing from the recipient to the supplier in the case of complimentary tickets. The ruling discussed various interpretations and precedents, including those from the Indian Contract Act, 1872, and international tax authorities, to conclude that the complimentary tickets do not involve any consideration.

4. Eligibility for Input Tax Credit (ITC)
The appellant claimed eligibility for ITC on inputs and input services used for providing complimentary tickets. The ruling clarified that ITC is directly linked to the taxability of the outward supply. Since the distribution of complimentary tickets does not qualify as a taxable supply, it is considered an exempt supply, and thus, ITC cannot be availed for such activities.

5. Right of Withdrawal of Application
The appellant argued that their request to withdraw the application for advance ruling was wrongly denied by the Ld. AAR. They cited precedents where withdrawal requests were accepted and emphasized that the withdrawal should not be denied unless the applicant has obtained some advantage or benefit. The ruling, however, did not specifically address this issue in the final decision.

6. Validity of the Ruling Pronounced Beyond the Prescribed Time Limit
The appellant pointed out that the ruling by the Ld. AAR was pronounced beyond the 90-day period prescribed under Section 98(6) of the CGST Act. The application was filed on 04.04.2018, and the order was passed on 20.08.2018. The ruling did not specifically address this procedural lapse in the final decision.

Final Decision:
1. Taxability of Complimentary Tickets: The activity of providing free complimentary tickets does not fall within the domain of supply as it lacks the element of consideration. However, if such tickets are provided to a related person or distinct person, they fall within the ambit of supply due to Schedule I of the Act, and the appellant would be liable to pay tax on the same.

2. Eligibility for ITC: The appellant is not eligible to avail ITC for the activity of providing complimentary tickets as it is considered an exempt supply. However, if the tickets are provided to a related or distinct person and treated as supply, the appellant would be entitled to avail ITC for the same.