goods sent for exhibition and get consumed during display, Goods and Services Tax - GST

[ajay chharia]

A printer manufacturer participates in a exhibition and sent

1. Large format Printers,

2.Media(paper roll or canvass or cloth)

3.Inks. During display media and ink get consumed as printed samples on printers taken away by the visitors. He bring back the printer. Whether ITC on media and ink to be reversed or not ?

Posts / Replies

[Sadanand Bulbule]

Dear querist

Section 17(5)(h) of the CGST Act, which governs blockage/reversal of ITC on following eventualities, reads as under:

[h] goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; 

So you need to reverse proportionate ITC on media & ink consumed in the printed material given by way of free samples.

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Sadanand.

[Shilpi Jain]

Further facts maybe required in this regard. What kind of printing is done at the exhibition? Why do the customers take away the prints? Do all take them away?

Can a view be taken that the printing is done to show the visitors the quality of printing and subsequently those prints are discarded ? Those discarded prints may have been taken away by the visitors.

Or can it be regarded as a printing service given free? Then there is no blocking of credit in both the above scenarios.

It is used during the exhibition being an activity integral to the business and is an expense not specifically blocked.

In my view thereby, there should be no requirement for reversal of any credit for this transaction. Though further details would help to conclude better.

[Amit Agrawal]

I agree with Ms. Shilpi Jain!

I see no reason to reverse any ITC against media & ink used for printing samples during exhibition of printer-machine. 

Section 17(5)(h) does not come into play at all in given situation, IMHO, as the subject inputs (i.e. media & ink) were never given as 'free samples'. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Its a pretty tricky situation. Suggest that you take professional help in case its a sizable amount and set right the documentation for this transaction so that it would be easy to defend any litigation in future.

[Sadanand Bulbule]

Dear querist

By the way, refer CBIC Circular No.92/11/2019-GST dated 07/03/2019 issued on the subject under discussion.

[Amit Agrawal]

In continuation of my above post at Serial No. 4, one may refer to my posts at Serial No. 31 read with 32 during discussion under Issue Id: - 118820 bearing subject-line as 'SEC 17(5)(h)'. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[ajay chharia]

Further clarification to my query : goods sent for exhibition and get consumed during display

the printing is done to show the visitors the quality of printing and subsequently those prints are discarded . Those discarded prints sometime have been taken away by the visitors.

Circular no 92 related to free samples/ gifts and various discount scheme and in my opinion does not cover such type of consumption.

[Amit Agrawal]

Dear Querist,

I agree with you. In given facts & circumstances of yours, Section 17(5)(h) as well as CBIC Circular No. 92/11/2019-GST dated 07/03/2019 has got no application as there is no goods which are given as 'free sample'. 

Even otherwise, IMHO, said circular has wrongly interpreted Section 17(5)(h) to deny ITC against goods (i.e. inputs as well as capital goods) as well as input services used in manufacturing a product (i.e. drug) which in-turn given as free sample. 

Section 17(5)(h) has limited application, IMHO, when any goods (on which ITC is taken or intend to be taken) are per se 'lost, stolen, destroyed, written off or disposed of by way of gift or free samples'. 

Section 17(5)(h) has no application, IMHO, when any goods (on which ITC is taken or intend to be taken) are used in manufacturing a product which in-turn got 'lost, stolen, destroyed, written off or disposed of by way of gift or free samples'. In such cases, there is no ITC taken in respect of "goods" which are 'lost, stolen, destroyed, written off or disposed of by way of gift or free samples'.

This becomes very clear once we take holistic way while interpreting the wordings used various sub-clauses u/s 17(5) to deny ITC (For example: sub-clause (fa) which disallows ITC against goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013))

This is more so because there is no legal provision (i.e. similar to Section 18(4)) incorporated in Section 17(5) or in any rules which prescribes methodology to quantify & demand "reversal of ITC against inputs / capital goods / input services" which are used for manufacturing a product which in-turn is given as free sample / destroyed by fire etc.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Sadanand Bulbule]

Dear Ajay ji

Circulars are illustrative in nature. They do not cover each and every intricate transaction per say. You have to convince the authority to its satisfaction. It may or may not accept it. Laws are not made to cover isolated transactions. Rather they are made to encompass "business"  as a whole in a broader way.

Every medicine does not cure the disease. Some medicines are administered for "test" purpose also.

[KASTURI SETHI]

Dear Querist,

Reversal is required.  There is not an iota of doubt. I fully endorse the views of Sh.Sadanand Bulbule, Sir.

If not reversed, SCN is certain.  Be safe.

  Disclaimer : These are my personal views  and posted for education purpose of all.

[Amit Agrawal]

Dear Querist,

Reversal is NOT required.  There is not an iota of doubt, in my mind, specially in the fact & circumstances explained by you above. 

Of-course, tax-payer must be willing to defend himself judicially if so needed. This is true for every situation (not just for issue under discussion here) where Dept. may take revenue-centric view though tax-payers holds different view. 

While there is always a 'possibility of dispute', I do not presume 'possibility of dispute' by Dept. as '100% certainty'. In many situations, in my experience well over two decades, I found that Dept. officer/s have dropped their initial objections when properly explained. 

By misapplying quoted circular for situation under discussion here, then, dispute can also be raised by Dept. even against GST paid for getting space / stall in exhibition, GST paid on Printers & so on & on. If if such exhibition are regular feature, then, all these will become recurring losses.

Then, question will be how much one can play "safe" (just because there is a possibility of dispute) specially when there are so many matters in GST where Dept. may take revenue centric views and tax-payer holds views contrary to Dept.

Needless to say, these are individual choices for every tax-payer to make, there is also cost involved for mounting judicial defense (if so indeed needed) and there cannot be hard & fast rule or universal approach. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion

[KASTURI SETHI]

The goods in question tantamount to free samples in real terms.