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2023 (10) TMI 472 - AAR - GSTRestriction of Input Tax Credit (ITC) - supply or not - goods disposed of by way of gift - applicant's obligation to issue gold coins and white goods to the dealers / customers upon they achieving the stipulated lifting of the material / purchase target during the scheme period - applicant's obligation to issue gold coins and white goods to the dealers/ customers upon they achieving the stipulated lifting of the material / purchase target during the scheme period - permanent transfer or disposal of business assets where ITC has been availed on such assets. HELD THAT - Seen in light of the fundamental statutory position the transaction in the case of the applicant is one of supply of goods to his dealers in exchange for consideration. The Consideration is the monitory value of the act of attaining a level of business indicted in the incentive scheme by the applicant. The applicant is inducing his dealers / stockiest to attain a particular level of business as a consideration for the goods to be supplied by him. The applicant is making supply of white goods and gold to his dealers or stockiest in return for the dealers or stockiest attaining a threshold of sales indicated in the scheme and therefore, the value of white goods and gold supplied by him are for the act of achieving this threshold and therefore taxable in his hands. The value of the goods supply is determined under Section 15 of the GST Act read with Rule 30 of the CGST Rules.
Issues Involved:
1. Whether the applicant's obligation to issue gold coins and white goods to dealers upon achieving purchase targets is regarded as "goods disposed of by way of gift" under Section 17(5)(h) of the CGST Act, 2017. 2. Whether such issuance is considered a "permanent transfer or disposal of business assets" and treated as a supply under Schedule-I to the CGST Act, 2017. 3. Whether the issuance of gold coins and white goods constitutes a supply under Section 7 of the CGST Act, 2017. Summary: Issue 1: Goods Disposed of by Way of Gift The applicant argued that the issuance of gold coins and white goods to dealers upon achieving purchase targets should not be regarded as "goods disposed of by way of gift" under Section 17(5)(h) of the CGST Act, 2017. They contended that these items are provided under a contractual obligation and not voluntarily, thus not qualifying as gifts. The Authority found that the transaction is taxable as a supply of goods and therefore eligible for Input Tax Credit (ITC). Issue 2: Permanent Transfer or Disposal of Business Assets The applicant contended that the issuance of gold coins and white goods does not constitute a "permanent transfer or disposal of business assets" as these items are not capitalized in the books of accounts but are revenue expenditures. The Authority ruled that the transaction is a supply of goods and not a permanent transfer or disposal of business assets. Issue 3: Supply under Section 7 of the CGST Act, 2017 The applicant argued that the issuance of gold coins and white goods should not be regarded as a supply under Section 7 of the CGST Act, 2017, as there is no consideration received. However, the Authority concluded that the transaction is indeed a supply under Section 7, as the issuance of these items is in response to the dealers achieving sales targets, which constitutes a consideration. Rulings: 1. The transaction is taxable as a supply of goods and therefore eligible for ITC. 2. The transaction is a supply of goods and not a permanent transfer or disposal of business assets. 3. The issuance of gold coins and white goods to dealers upon achieving purchase targets is regarded as a supply under Section 7 of the CGST Act, 2017.
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