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TMI Blog2022 (2) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Act, 2017 i.e. Activities to be treated as supply even if made without consideration. As per the said provisions, any supply of goods or services or both when made in the course or furtherance of business between the related persons or between the distinct persons, the same would be treated as supply even when the supply is made without consideration. As such, any transaction between the related persons or between the distinct persons, irrespective of the consideration, would be treated as 'supply' and hence taxable under GST. The cigarettes would not be supplied through sole distributor (i.e. related person) and in case of any divergence from the said disclosure (i.e. in case of supply to related person or distinct person), the ruling will be void ab-initio as per Section 104 of the CGST Act, 2017. - UP ADRG 84/2021 - - - Dated:- 18-10-2021 - SHRI ABHISHEK CHAUHAN AND SHRI VIVEK ARYA, MEMBER Represented by : Shri Priyadarshi Manish, Advocate Authorized representative ORDER UNDER SECTION 98(4) OF THE CGST ACT, 2017 UNDER SECTION 98 (4) OF THE UPGST ACT, 2017 1. M/s Golden Tobie Private Limited, Unit No-302, Third Floor, Padam Business Park, Plot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of cigarettes, the Applicant would supply 130 packs of cigarettes to distributors A against the same taxable value of ₹ 10,000/- on which GST and compensation cess at applicable rates would be charged, levied and collected. (ii) That the Applicant would prepare the tax invoice showing total quantity of cigarettes as 130 packs and taxable value as ₹ 10,000/- and calculate thereon the GST and compensation cess. (iii) That as required under the provisions of Legal Metrology (Packing Commodities) Rules, 2011, the MRP would be printed on each of the said 130 packs of cigarettes. The packs of cigarettes containing additional quantity would not indicate that the same are free supplies or are in any manner different from the packs of cigarettes in the original quantity. The distributors would have two options in this case that is either to pass on the said benefit or the benefit of additional quantity of cigarettes packs received within the price of the original quantity to their stockist or retailers as the case may be. (iv) That in order to further clarify it is submitted that by way of the scheme a specific number of cigarettes / cigarette packs would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so mentioned in the invoice would correspond to the entire quantity of cigarettes supplied under the said invoice which would include the additional quantity as well. (iii) therefore, this cannot be a case of free supply without consideration and thus supply of original quantity along with the additional quantity would be supply as indicated in clause (a) to sub-section (1) of Section 7 of the UPGST Act, 2017. (iv) as per sub-section (1) of Section 15, the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both when the supply and the recipient of the supply are not related parties and the price is the sole consideration for the supply. (v) sub-section (3) of Section 15 categorically states that the value of the supply shall not include in discount which is given before or at the time of supply, if such discount has been duly recorded in the invoice issued in respect of such supply. (vi) the Section 15 enumerates the items which are to be included in the value and the items which are not to be included in the value for the purposes of calculation of tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 'buy one soap and get one soap free' or 'Get one tooth brush free along with the purchase of tooth paste'. As per sub-clause (a) of sub-section (1) of section 7 of the said Act, the goods or services which are supplied free of cost (without any consideration) shall not be treated as `supply' under GST (except in case of activities mentioned in Schedule I of the said Act). It may appear at first glance that in case of offers like 'Buy One, Get One Free', one item is being 'supplied free of cost' without any consideration. In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one. ii. ***** iii. It is also clarified that ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to supply of goods or services or both as part of such offers. (xiii) That the relevance of the scheme No.(b) qua the Applicant is that it provides extra quantity besides the normal quantity for which the payment is made. That in the scheme i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 5,000/- at applicable rate. Question (i) In the above transaction, whether the extra packs of cigarettes would again be leviable to GST? Answer :- Answered in the negative in view of the discussions made above. Question (ii) If yes, the taxable value which can be attributed to such extra packs of cigarettes for levy of GST? Answer :- Not answered in view of answer to Question No. 1 above. Question (iii) :- Whether extra packs of Cigarettes would be considered as exempt supplies or free samples and hence attract the provisions of Section 17(2) of the UPGST Act, 2017 read with Rule 42 of the UPGST Rules, 2017 or clause (h) of Section 17(5) of the UPGST Act, 2017? Answer :- The extra packs of cigarettes will not be considered as exempt supplies or free samples and hence the provisions of [Section] 17(2) read with Rule 42 of the UPGST Rules, 2017 or clause (h) of Section 17(5) of the UPGST Act, 2017 will not be applicable. (xv) That therefore, even the Applicant's situation is similar to the one illustrated in the aforementioned case decided by this Hon'ble Authority and the only difference being that the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Form GST ARA-01 filed by the applicant and observed that the applicant has ticked following issue on which advance ruling required- (7) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. We find that the issue raised in the application is squarely covered under Section 97(2) of the CGST Act 2017. We therefore, admit the application for consideration on merits. 10. We have gone through the submissions made by the applicant and have examined the same. We observe that the applicant has sought advance ruling on the following questions- (i) In the above transaction whether the extra packs of cigarettes would again be leviable to GST. (ii) If yes, the taxable value which can be attributed to such extra packs of cigarettes for levy of GST (iii) Whether extra packs of cigarettes would be considered as exempt supplies or free samples and hence, attracts the provisions of Section 17(2) of the UPGST Act, 2017 read with Rule 42 of the UPGST Rules, 2017, or clause (h) of Section 17(5) of the UPGST Act, 2017. 11. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional schemes which are offered by taxable persons to Increase sales volume and to attract new customers for their products. Some of these schemes have been examined and clarification on the aspects of taxability, valuation, availability or otherwise of Input Tax Credit in the hands of the supplier (hereinafter referred to as the ITC) in relation to the said schemes are detailed here under: A. Free samples and gifts: B. Buy one get one free offer: i. Sometimes, companies announce offers like 'Buy One, Get One free For example, buy one soap and get one soap free or Get one tooth brush free along with the purchase of tooth paste As per sub-clause (a) of sub-section (1) of section 7 of the said Act, the goods or service which are supplied free of cost (without any consideration) shall not be treated as supply under GST (except in case of activities mentioned in Schedule I of the said Act). It may appear at first glance that in case of offers like Buy One, Get One Free ; one item is being 'supplied free of cost without any consideration. In fact, it is not an individual supply of free goods but a case of two or more individu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred to the applicant on stock transfer basis on payment of appropriate GST and compensation cess but contrary to their disclosure, it has been noticed that the cigarettes are being manufactured by the applicant at Industrial Plot No. 69-A, Toycity Ecotech-III, Greator Noida, Gautam Budh Nagar as per Invoice No. GTL/EX/046/21-22 dated 23.07.2021 of the applicant. Further, the applicant had made disclosure in Annexure II of Form GST ARA-01 that their distributor is not the sole distributor but the said disclosure is not supported by any agreement executed with distributors. 17. We find that the provisions relating to 'supply' with respect to related persons and / or distinct persons are specifically covered within schedule I of the CGST Act, 2017 i.e. Activities to be treated as supply even if made without consideration. As per the said provisions, any supply of goods or services or both when made in the course or furtherance of business between the related persons or between the distinct persons, the same would be treated as supply even when the supply is made without consideration. As such, any transaction between the related persons or between the distinct per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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