2022 (9) TMI 365 - AAR - GST

Input Tax Credit - inputs/input services - promotional scheme - Services provided by the hotel including accommodation, food beverages - Supply of food and beverages by outside caterer to our employees in respect of Business conference meetings - section 16 read with section 17 of the CGST Act, 2017 - HELD THAT - The promotional scheme was extended by the applicant at their own will voluntarily without any consideration in money. The goods distributed under promotional scheme are not in the nature of discounts to the products but are in the nature of personal consumables and qualifies to be termed as gifts. The 'Scheme Circular' provided by the applicant alongwith Form GST ARA-01 also contains the words 'Gift Option 1', 'Gift Option 2' and 'Gift Option 3'. Further, the gift items are fixed based on the retailers purchase of the targeted products as per Annexure C of the Form GST ARA-01 and not on the sales made by the retailers. Moreover, the rewards are handed out to the successful retailers and no tax invoice/any taxation document are raised for such handout - it is clear that the tax paid on the goods procured for distribution as rewards extended by the applicant in the Bumper Offer, Winter Bonanza' scheme or any other such scheme is not available to them as ITC in as much as such rewards have been extended as gifts on purchase of animal health products. Admissibility of input tax credit in respect of tax paid - Services provided by the hotel including accommodation, food beverages - Supply of food and beverages by outside caterers to their employees in respect of Business conference meetings - HELD THAT - From the co joint reading of Section 16 and 17(5)(b) of the Central Goods and Services Tax Act, 2017, it is observed that the ITC with respect to food and beverages and outdoor catering shall be available only where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply - the applicant is engaged in the business of trading of animal health products and not in the business of provision of food or catering.. Even if the provision of food and catering had been in the course of furtherance of business, the applicant is not entitled to the input tax credit in light of the express bar provided under Section 17(5)(b)(i) of the CGST Act, 2017.

Summary

Issues Involved:
1. Eligibility of Input Tax Credit (ITC) on GST paid for inputs/input services procured for promotional schemes.
2. Admissibility of ITC on tax paid for services provided by hotels (including accommodation, food & beverages) and supply of food and beverages by outside caterers for business conference meetings.

Issue-wise Detailed Analysis:

1. Eligibility of Input Tax Credit on GST Paid for Inputs/Input Services Procured for Promotional Schemes:

The applicant, engaged in trading animal health products, introduced promotional offers such as "BUMPER OFFER" and "WINTER BONANZA," where they provided additional products (e.g., lunch boxes, sandwich makers) to retailers for free. The applicant sought a ruling on the admissibility of ITC on the procurement of these promotional items.

The eligibility of ITC is governed by Sections 16 and 17 of the CGST Act, 2017. Section 16(1) allows credit for input tax charged on goods/services used in the course or furtherance of business. However, Section 17(5) restricts ITC on certain items, including goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples.

The applicant argued that the promotional items are used in furtherance of business and should not be considered gifts. However, the Authority found that these items, distributed voluntarily and without consideration, qualify as gifts. The promotional items are for personal consumption by retailers, thereby falling under the restrictions of Section 17(5)(g) and (h). Consequently, the tax paid on these goods is not eligible for ITC.

2. Admissibility of Input Tax Credit on Tax Paid for Hotel Services (Including Accommodation, Food & Beverages) and Supply of Food and Beverages by Outside Caterers for Business Conference Meetings:

The applicant also sought a ruling on the admissibility of ITC on tax paid for services provided by hotels (including accommodation, food & beverages) and the supply of food and beverages by outside caterers for business conference meetings.

Section 17(5)(b) of the CGST Act, 2017, restricts ITC on food and beverages, outdoor catering, and related services unless these services are used for making an outward taxable supply of the same category or as an element of a taxable composite or mixed supply. The applicant, engaged in trading animal health products, does not provide food or catering services. Therefore, even if these services are used in the course of business, ITC is not admissible due to the express bar under Section 17(5)(b)(i).

The applicant's reliance on the ruling in the case of M/s All Rajasthan Corrugated Board and Box Manufacturers Association was found inapplicable, as the facts of the cases differ significantly.

Ruling:

1. Question 1: Whether the GST paid on inputs/input services procured for promotional schemes is eligible for ITC under the GST law in terms of Section 16 read with Section 17 of the CGST Act, 2017?
- Answer: Negative.

2. Question 2: Whether ITC is admissible in respect of tax paid on:
- i. Services provided by the hotel including accommodation, food & beverages.
- ii. Supply of food and beverages by outside caterers for business conference meetings.
- Answer: Negative.

This ruling is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, subject to provisions under Section 103(2) of the CGST Act, 2017, until declared void under Section 104(1) of the Act.