2023 (7) TMI 1221 - AAR - GST

Scope of Advance Ruling application - supplies undertaken prior to the date of filing of the application for advance ruling - Input Tax Credit - GST paid on the advertisement expenses like calendars, t-shirts, pens, open bags etc. printed with company name/logo and distributed in business meetings, workshops for advertisement, business promotion, marketing and to build up and maintain public image of the company - mandatory minimum percentage of the value of loan that should be charged by the directors from the company in lieu of giving personal bank guarantee for sanctioning loan/credit limits to the company or not - HELD THAT - From the provisions of Section 95, it is seen that this authority is constituted to decide on matters or questions specified in sub-section (2) of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. On going through the facts of the case, the applicant has not disclosed the practice already being followed by him in previous period. It is observed that applicant filed their application before the Rajasthan Authority for Advance Ruling (RAAR) on 15.10.2022 i.e. much later from the discharging his GST liability It is also found that Section 17(5) (g) 17 (5) (h) on question no one, Section 15 (1) Section 15(5) on question no 2, and Section 18 (6) on question no 3 are very much clear and there is no ambiguity in these section. We observe that the applicant is well aware about the sections and discharging his tax liability in accordance to them. The scope of the ruling for Authority for Advance Ruling (AAR) is limited to the transactions being undertaken or proposed to be undertaken on the matters which are not sorted out. In the instant case, the application seeking advance ruling was filed on 15.10.2022 before the RAAR with respect to supplies already being undertaken, GST being paid and GST returns has been submitted. Hence, the case is out of the purview of the Advance Ruling.

Summary

Issues Involved:
1. Eligibility of Input Tax Credit (ITC) on advertisement expenses.
2. Valuation of services provided by directors for personal bank guarantees.
3. Tax liability on the transaction value of rolling mill metal rolls used in production.

Summary of Judgment:

1. Eligibility of Input Tax Credit (ITC) on Advertisement Expenses:
The applicant sought a ruling on whether ITC would be eligible on the GST paid for advertisement expenses like calendars, t-shirts, pens, and bags printed with the company name/logo and distributed in business meetings, workshops, etc. The applicant argued that these expenses are in the course or furtherance of business, thus ITC should be eligible under Section 16(1) of the CGST Act, 2017. However, the authority found that such items are distributed free of cost and for personal use, making ITC on such items blocked under Section 17(5)(g) & (h).

2. Valuation of Services Provided by Directors for Personal Bank Guarantees:
The applicant inquired if there is any mandatory minimum percentage of the loan value that directors should charge for providing personal bank guarantees or if it is at their discretion. The authority clarified that services supplied by directors to the company are taxable under the Reverse Charge Mechanism (RCM) as per Section 9(3) & 9(4) of the CGST/RGST Act, 2017, and the valuation should follow Rule 28(b) of the Valuation Rules, 2017. The transactions are taxable even without consideration as per Section 7(1)(c) read with Para-2 of Schedule-1 of the CGST Act, 2017.

3. Tax Liability on the Transaction Value of Rolling Mill Metal Rolls:
The applicant questioned if they could pay tax on the transaction value of rolling mill metal rolls used in the production process of TMT bars under Section 15. The authority confirmed that the applicant is eligible to pay tax on the transaction value determined under Section 15 of the CGST/RGST Act, 2017, for rolling mill metal rolls.

Conclusion:
The authority concluded that the questions posed by the applicant pertain to supplies undertaken before the filing of the application for advance ruling. Therefore, no ruling was pronounced on the questions under the provisions of the GST Act, 2017, as the case is out of the purview of the Advance Ruling.