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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 ..... ried to build upon the argument by deploying sub-section (5) of section 17 of the Act to argue that even though this transaction does not fall within the domain of supply but the availment of input tax credit cannot be denied. Here the appellant has conveniently missed the principle in relation to availment of ITC. Looking broadly at the scheme of things under the GST Act it can be deduced that the availment of ITC directly flows with the taxability of the outward supply. Where the output supply is either not taxable that is exempt or has been used or deployed for non-business purpose the Act does not provide for availment of ITC in relation to such supply - The expression exempt supply as defined under the Act means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply. So, the activity of providing complimentary tickets is an exempt supply, and therefore there shall be no availment of ITC in relation to same in accordance with sub-section (2) of section 17 of the Act. Thus, appellant would not be eligible t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout paying any money, which other persons not receiving such complimentary tickets would have to pay for. 6. The Ld. Authority also held that the monetary value of this act of forbearance would be the amount of money charged from the persons paying for the tickets for availing the same service. 7. The Ld. Authority invoked Clause (e) of Schedule II of the Central Goods and Services Tax Act, 2017, ((hereinafter referred to as, CGST Act ) that agreeing to the obligation to refrain from an act or to tolerate an act or situation, or to do an act would be treated as supply of services. It was held that even without consideration and based on the provisions of Schedule II read with clause (a) and (d) of sub-section (1) of Section 7 of the CGST Act, the transaction can be termed as supply and leviable to tax under CGST Act. 8. The Appellant, aggrieved with the decision, has filed an appeal with the Appellate Authority for Advance Ruling u/s 99 of the Punjab GST Act, 2017/CGST Act, 2017. II Order of the Authority for Advance Ruling: Relevant extract of the order No. AAR/GST/PB/002 DATED 20.08.2018 is reproduced below: Accordingly we pronounce the following Advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant further submitted that as the Government officials/ consultants do not fall within the definition of related persons and the supply of tickets is only made as a goodwill gesture. It was also submitted that there is no expressed or implied consideration promised by the Government Officials or Consultants to the Appellant at the time of receipt of the tickets or in the future. Decoding actual nature of the transaction: A.5 The Appellant referred the following definitions to enunciate on the nature of the transaction carried out between the Appellant and the receivers of complimentary tickets: Section 2(47) of the CGST Act defines exempt supply as supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act and includes non-taxable supply. Section 2(78) of the CGST Act defines non-taxable supply as a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act. Taxable supply is defined under under Section 2(108) of the CGST Act means a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 Sector at concessional rates. C.2 It was clarified that no tax is payable on clearance of physician samples distributed free of cost as the value of supply is zero and no credit has been availed. Similarly, for the banking sector, it was clarified that in case of services provided at a concessional / differential rate to a recipient other than related party / distinct person , there is no requirement for enhancing the value of services by invoking the CGST Rules, 2017. C.3 Therefore, the interpretation adopted by the CBIC is of the basis that when there is no consideration involved and the parties are not related then the transaction shall not be considered as a supply and is not taxable under the CGST Act. C.4 It is also submitted by the appellant that in absence of any clarity on the instant issue of complimentary tickets at hand, accepting the view that favours similar transactions of one sector and not the other shall not only bring ambiguity rather th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 instant case shall be considered as supply of services. Hence, basis perusal of the above provisions, it can be observed that the eligibility of ITC is only denied for goods that are supplied as free samples and does not talk anything about services. Hence, the ITC on the complimentary tickets in the instant case is applicable D.8 It is submitted by the appellant that Section 16 of CGST Act provides that every registered taxable person shall in the manner specified in Section 44, be entitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business. Even though there is no definition available as to what shall include supply made in the course or furtherance or business , when the use of inputs/input services is helping in achieving the objectives of the business in a better and effective way, the corresponding ITC should be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order may be set aside on this ground and the appeal may be allowed. IV: Proceedings and Physical hearing: Ms. Priyanka Singla appeared on the behalf of the appellant and she reiterated the submissions made during the course of personal hearing which have already been taken into record. She also reiterated the points made in the synopsis submitted by them. Discussion and Findings: 1. We have carefully gone through the facts of the case, the grounds of appeal delineated by the appellant, order of Authority for Advance Ruling and the relevant legal provisions of the Act. 2. The primary question to be decided is whether the activity of providing complimentary tickets by the appellant falls within the definition of supply under the Punjab GST Act,2017 /CGST Act,2017 and whether the appellant would be required to pay tax on such complimentary tickets. As per the appellant, complimentary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, 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, 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: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; 6. The key elements of consideration that emerge from the said definition are detailed hereunder: a) Consideration includes both the payment made as well as payment to be made. This signifies that the consideration is not only limited to the payment received but shall also include the payment which has not been received; b) Consideration can be in the form of money or otherwise. This implies that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consideration. Further, the aspect of non-monetary consideration has been clarified by European Court of Justice and even by other tax authorities such as Australian Tax Office as well as UK HMRC. So, by exploring the definition of consideration in kind in these references the issue can be examined in the right perspective. 8. The Australian Taxation Office (ATO) in its GST Public Ruling on non-monetary consideration has clarified that where there is monetary consideration for a supply, it does not necessarily follow that there is no other consideration for that supply. The ATO states that merely ascribing a monetary amount or value to a thing will not cause it to be expressed as an amount of money . In order to identify non-monetary consideration, there should be sufficient nexus between the supply and the non-monetary payment as consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 good consideration for a promise unless it is executed at the desire of the promisor. This has been brought out by the Hon ble Court in the case of Durga Prasad v Baldeo [Durga Prasad v. Baldeo and Ors, [1881] ILR 3 ALLAHABAD 221 wherein the issue was that at the order of the collector, on his own expense, the plaintiff built certain shops in a bazar. The shops came to be occupied by the defendants who, as a consideration to the plaintiff for having expended finances for the construction of the shops, promised to pay him a commission on certain articles sold by their agency in the bazar. The action of the plaintiff to recover the commission was rejected. The only ground for the making of the promise is the expense incurred by the plaintiff in establishing the Ganj (market) but it is clear that anything done in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 case of BAZ Bausystem Gmbh v Finanzamt Munchen Fur Korperschaften the ECJ held that interest awarded to an undertaking by a judicial decision was not consideration where the reason for the award was that the balance of the consideration for services was not paid by the due date, because it had no connection with the services provided and did not constitute consideration relating to a commercial transaction - it was simply compensation for the delay in payment. 18. In the case of Apple Pear Development Council (APDC), (ECJ (1988) STC 221; (1988)2 CMLR 394), the Council is a statutory body formed to promote the sale of apples and pears. Commercial growers were required to register with the council and pay an annual levy. The industry as a whole received the benefit of its promot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined 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 this transaction does not fall within the domain of supply but the availment of input tax credit cannot be denied. Here the appellant has conveniently missed the principle in relation to availment of ITC. Looking broadly at the scheme of things under the GST Act it can be deduced that the availment of ITC directly flows with the taxability of the outward supply. Where the output supply is either not taxable that is exempt or has been used or deployed for non-business purpose the Act does not provide for availment of ITC in relation to such supply. Since the appellant itself has argued that the activity does fall within the domain of supply it consequently follows that it shall be treated as a non-taxable supply under the Act. The expression exempt supply as defined under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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