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TMI Blog2022 (7) TMI 700X X X X Extracts X X X X X X X X Extracts X X X X ..... be distributed without any consideration flowing from the receivers to the Appellant. 3. Consequently, the Appellant approached the Ld. Authority for Advance Ruling, ((hereinafter referred to as, "AAR") Punjab with the intention of seeking clarity on the treatment and possible GST liability on the supply of complimentary tickets on account of courtesy/ public relationship/ promotion of business, with the above mentioned questions. 4. The Ld. Authority vide its Order No AAR/GST/PB/002 dated 20th August, 2018 ((hereinafter referred to as, "Impugned Order") received by the Appellant on 04th September, 2018 held that activity of providing complimentary tickets without any consideration would be considered as supply of services and the Appellant would be eligible for Input Tax Credit (hereinafter referred to as, "ITC") in respect of complimentary tickets. 5. The Ld. Authority held that when Appellant issues a complimentary ticket to any person, the Appellant is displaying an act of forbearance by tolerating persons who are receiving the services provided by the Appellant without paying any money, which other persons not receiving such complimentary tickets would have to pay for. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd services alike, the provisions relating to the Input Tax Credit (ITC) of free supplies of goods and services differ. To begin with, the definition of supply includes the following four elements: i. All forms of supply such as sale, transfer, barter, exchange, license, rental, lease and disposal ii. Flow of consideration (except activities specified in Schedule I of the CGST Act, iii. Supply from one person to another iv. in the course of furtherance of business A.3 However, in the impugned order (para 4), the Ld. AAR has vaguely applied the definition of consideration as defined under Section 2(31) of the CGST Act. The definition provides that any consideration, whether money or otherwise should have flown from the buyer to the supplier and accrue for the benefit of the later. So, the understanding that 'act of forbearance' is being carried out by the Appellant may be correct but the consideration cannot flow from the Appellant to itself. Therefore, the components of consideration do not get fulfilled. A.4 The Appellant further submitted that as the Government officials/ consultants do not fall within the definition of 'related persons' and the supply of tickets is onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The perusal of the amendment also indicates that the intent of Schedule II of the CGST Act was only to classify certain transactions as either goods or services. It was never meant to include these transactions in the scope of supply even when there is no consideration. B.4 Further, the amendment has inserted sub-section 1A to Section 7 of the CGST Act with effect from 01.07.2017 which inter-alia specifically states that only the activities or transactions which qualify as a supply in accordance with Section 7(1) shall undergo the test of classification under Schedule II. B.5 Accordingly, the application of Section 7 (1)(d) of CGST Act is no more relevant for the activity of giving complimentary tickets and thus fails to qualify the test of supply in terms of Section 7 of CGST Act, 2017. C. Interpretation adopted in the Impugned Order is contrary to the clarification and FAQ's released by Central Board of Indirect Taxes & Customs (CBIC) C.1 The appellant has submitted that the CBIC has periodically released FAQs clarifying various sector-wise issues and while discussing the issues of free samples distributed in pharmaceutical sector and services provided by Banks and Insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lost, stolen, destroyed, written off or disposed of by of gift or free samples" D.5 Therefore, the Appellant humbly submitted that upon perusal of the relevant legal provisions, it may be inferred that there is no expressed provision for reversal of ITC under the GST law when the services are provided free of cost without any consideration. Further, the Appellant submits that the Ld. Authority in the impugned order has held that as the distribution of complimentary tickets falls under the definition of supply, hence, there shall be no restriction on availing of ITC. Which entails that in accordance with the legal provisions discussed above the ITC shall have to be reversed if the distribution of complimentary tickets do not qualify as supply. D.6 However, the Appellant submitted that it has been established above that even though the distribution of complimentary tickets does not amount to supply under the provisions of CGST Act, there is no requirement of reversal of ITC. D.7 Further, based on the description of services under the entry at S. No. 34 of the Notification No. 11/ 2017-Central Tax (Rate) dated 28.06.2017 provides that the activities provided by the Appellant in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est was filed and was duly accepted by the Madhya Pradesh AAR reported at 2018 (9) TMI 695 - AAR, Madhya Pradesh In Re: KPH Dream Cricket Pvt' Ltd. E.4 The Appellant has also placed reliance on the decision of Sainath Enterprises reported at 2016-TIOL-2836-ITAT-MUM wherein the Mumbai Bench of ITAT observed that it was open to a petitioner/appellant to pursue or abandon a case. Withdrawal cannot be denied except when the person making the prayer has obtained some advantage/benefit, which he seeks to retain. E.5 Hence, the appeal must be allowed on this ground only that the Appellant intended and expressed before the Ld. AAR that they wanted to withdraw the application. F. Ruling bad in law for being pronounced after the 90 days of receipt of application F.1 Without prejudice to the above submissions, the Appellant submits that Section 98(6) of the CGST Act reads that "The Authority shall pronounce its advance ruling in writing within ninety days from the date of receipt of application." In the instant case, the application before the Ld. AAR was filed on 04.04.2018 and the order was passed on 20.08.2018, which was beyond the time frame prescribed under law. Hence, the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as already been answered positively by the appellant himself. As for the question of presence of consideration in such transaction, the appellant has submitted that the element of consideration is missing in this transaction and therefore the same should not fall within the ambit of supply. While the Authority for Advance Ruling negated this argument by deploying the entry of clause (e) of paragraph 5 of schedule II of the Act whereby they have argued that the appellant has provided service by tolerating an act and therefore the consideration flows in such transaction. 5. It is important to look at the definition of "consideration" under the Act in order to appreciate its true nature. The definition is reproduced hereunder for reference: "Section 2 (31) consideration in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, in respect of in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods or services or both has been taken out of the fold of consideration. However, the same may be included in consideration when such deposit is applied as consideration for the said supply by the supplier. 7. Now, after identifying the key elements of consideration under the Act, the question that begets answer is whether the activity of complimentary tickets being provided by the appellant has the flavour of consideration present in it to bring it within the scope of supply under the Act. The aspect of payment in the form of money has already been taken out of the equation as the appellant has stated that they are not receiving any money for the complimentary tickets. So, now the other significant component that is emerging from the said transaction is whether any consideration in kind is flowing from the recipient to the supplier for the said activity or transaction. Although the concept of payment in kind has not been elucidated under the Act but the same has been thoroughly studied in various other forms under the Indian Contract Act, 1872. Even the provisions of the erstwhile Finance Act, 1994 which governed the service tax regime had defined the non-monetary consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration. An activity done without such a relationship i.e. without the express or implied contractual reciprocity of a consideration would not be an 'activity for consideration' even though such an activity may lead to accrual of gains to the person carrying out the activity. Similarly, there could be cases of payments without an activity though they cannot be put in words as being "consideration without an activity". Consideration itself pre-supposes a certain level of reciprocity. Thus grant of pocket money, a gift or reward (which has not been given in terms of reciprocity), amount paid as alimony for divorce would be examples in this category. 11. Now, coming to the Indian Contract Act, Section 2(d) of the said Act gives a practical definition of consideration. The expression "consideration" is defined as follows: "When, at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise." 12. The key point that emerges from the definition is that an act shall not be considered to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing in return for his supply and would not fulfil his obligation unless he thought that payment would be forthcoming. 16. The requirement for a direct link is brought out in three ECJ (European Court of Justice) cases. The case of Staatssecretaries van Financien v Cooperatieve Aardapplenbewarr-plaats ((1981) ECR 445; (1981) involved a co-operative providing cold storage facilities to its members who had the right to store potatoes because of the share each member held in the co-operative. Charges were normally made to the members for the storage but for two consecutive years no charges were made. This resulted in a drop in the value of the shares (reflecting the co operative's reduced profits because of the lack of storage fee income). The Dutch tax authorities argued that the reduction in value of each members share was effectively consideration for the storage which had been provided for no fee. The ECJ rejected this argument. There was no direct link between the services of storage and the decrease in share values. Additionally the reduction in value of the shares could not be equated directly to the cost or any other measure of the value of the services provided. 17. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , without any consideration, do not qualify as supply under GST, except where the activity falls within the ambit of Schedule I of the said Act." 21. Thus, the argument by the appellant that on account of absence of consideration in such activity or transaction, the same should not fall within the territory of supply is well taken and therefore the activity of providing such free or complimentary tickets is not a supply as per the GST Act. However, it is important to note here that as per section 7 of the Act read with Schedule I any activity or transaction between the related person including employee shall be treated as supply even if the aspect of consideration is not there. So, where such complimentary tickets are being provided by the appellant to related person as defined in section 15 of the Act or to distinct person as defined in section 25 of the Act the same would fall within the ambit of supply even if there is no consideration. 22. As far as the question of availment of input tax credit (hereinafter referred to as, "ITC") is concerned, the appellant has tried to build upon the argument by deploying sub-section (5) of section 17 of the Act to argue that even though thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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