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TMI Blog2022 (9) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... document are raised for such handout - it is clear that the tax paid on the goods procured for distribution as rewards extended by the applicant in the `Bumper Offer, Winter Bonanza' scheme or any other such scheme is not available to them as ITC in as much as such rewards have been extended as gifts on purchase of animal health products. Admissibility of input tax credit in respect of tax paid - Services provided by the hotel including accommodation, food beverages - Supply of food and beverages by outside caterers to their employees in respect of Business conference meetings - HELD THAT:- From the co joint reading of Section 16 and 17(5)(b) of the Central Goods and Services Tax Act, 2017, it is observed that the ITC with respect to food and beverages and outdoor catering shall be available only where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply - the applicant is engaged in the business of trading of animal health products and not in the business of provision of food or catering.. Even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to animals. (ix) They provide fixed rewards to retailers under the schemes based on the quantity and value purchases made by retailers from sub stockiest. (x) They offer some free additional products along with purchase under several offers/schemes. Some examples are mentioned below for better understanding: a) If a retailer purchases 1 case of CVSS (1 K.G) under the offer Power Bonanza , he will get 1 Milton Double Decker lunch box absolutely free. b) If a retailer purchases Antibiotics of Rs. 11,000 under the Winter Offer , he will get a Maharaja Sandwich Maker or MOP with Bucket absolutely free and if the retailer purchases Antibiotics of Rs. 13,000 c) under the same offer, he will get a signature blanket or a ceiling fan free. d) If a retailer purchases 100 vials OLONE-CEF I.U. or Hygen/Mix of Both then he will get an Electric Kettle absolutely free under the Combo Offer . (xi) because of these kinds of offers and schemes, they have to purchase some additional products which they distribute to retailers under several offers absolutely free. (xii) They have to do meetings and conferences for business promotion within India and outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary course of business, one of which is a principal supply; (x) As per the definition, the essential conditions for a supply to qualify as composite supply can be highlighted as under:- (a) 2 or more taxable supplies of goods or services or both. (b) The taxable supplies should be naturally bundled. (c) The taxable supplies should be supplied in conjunction with each other. (d) One taxable supply should be a principal supply. (xi) Education Guide issued by CBEC in the year 2012 is referred which provided that whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business. (xii) Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below - (a) The perception of the consumer or the service receiver. (b) There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. (c) The elements are normally advertised as a package. (d) The different elements are not available separately. (e) The different elements are inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inputs, input services and capitol goods to the extent they are used in relation to the gift or free samples distributes without any consideration. (iii) the AAR Karnataka vide Advance Ruling No. KAR ADRG 28/2019 in the case of M/s Surfa Coats (India) Pvt. Ltd has ruled as under- The applicant is not eligible to avail input tax credit on the inward supplies of goods and services which are attributable to the incentives provided in the form of gifts of goods and services to the painters and dealers and other persons under CGST/SGST/IGST Act. (b) the input tax credit on services provided by the hotel including accommodation, food beverages, on supply of food and beverages by outside caters to employees in r/o Business conference, meetings are not admissible on following grounds- (i) Section 17(5)(b)(1) of CGST Act, 2017 excludes input tax credit of food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Business conference meetings. 11. We find that the applicant is engaged in the business of trading of Animal Health Products. The applicant have introduced sales promotional offers named as BUMPER OFFER, WINTER BONANZA . Under the said scheme, they offer some free additional products (such as lunch box, sandwich maker etc) along with purchase under several offers/schemes. The applicant has sought ruling on admissibility of input tax credit involved on procurement of said promotional items and also on meetings and conferences-for business promotion within India and outside India. The applicant has also submitted that promotional items distributed to retailers are to be treated as inputs/input services used in furtherance of business and the promotional materials are not gifts and are not covered under Section 17(5)(h) of the CGST Act, 2017. 12.1 The eligibility of input tax credit is governed by the provisions of Section 16 and Section 17 of the CGST Act, 2017. Section 16(1) of the CGST Act, 2017 reads as under- Section 16 (1). Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit, as conditions for taking of credit are satisfied, but Section 17(5) shall block the credit in respect of certain cases. Moreover, Section 17 (5) is a specific provision. It is an established principle that specific provisions prevail over general provisions. If there is dispute between Section 16 and Section 17(5), then Section 17(5) over rides Section 16. In other words, if something qualifies for ITC under section 16 but is blocked from. ITC under section 17(5) then ITC would not be available. 12.6 Section 17(5)(g) of the CGST Act, 2017 restricts the ITC on the goods/services procured for personal consumption, even if those goods/services are procured in the furtherance of business. The goods procured for disbursement in the scheme by the applicant are Laptop Bag, Sandwitch Maker, Electric Kettle, Blanket, Lunch Box, Mixer grinder etc which are distributed to the retailers for their personal consumption. As the credit of taxes paid on the goods/services for personal consumption is explicitly restricted and the goods distributed to retailers under promotional scheme are used by the retailers for personal consumption, the applicant is ineligible to take input tax credit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the applicant in the application of advance ruling is negative in our view. 13. Now we proceed to examine the second question regarding admissibility of input tax credit in respect of tax paid on (i) Services provided by the hotel including accommodation, food beverages and (ii) Supply of food and beverages by outside caterers to their employees in respect of Business conference meetings 13.1 The applicant has submitted that the hotel will be providing a bouquet of Services to them like accommodation for the delegates, availability of conference hall and Food beverages. The above bundle of services shall qualify as a composite supply by the hotel where accommodation service shall be the principal supply. Input Tax Credit of CGST and SGST charged by the hotel on the composite supply of accommodation service shall be available to them since such supply will be used in course of business and it is an eligible credit in terms of Section 16 of CGST Act, 2017. 13.2 We find that Section 17(5)(b) reads as under- (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodation, food beverages, and Supply of food and beverages by outside caterers were used by the applicant. As such, the facts of the said case are entirely different and not applicable to instant case. 13.6 As such, the answer of the second question raised by the applicant in the application of advance ruling is also negative in our view. 14. In view of above discussion, we pass the following ruling- RULING 15. Question (1)- Whether the GST paid on inputs/input services procured by us for promotional scheme are eligible for input tax credit under the GST law in terms of section 16 read with section 17 of the CGST Act, 2017? Answer (1)- Answered in negative. Question (2)- Also, whether Input Tax Credit is admissible to us in respect of tax paid on i) Services provided by the hotel including accommodation, food beverages. ii) Supply of food and beverages by outside caterers to our employees in respect of Business conference meetings. Answer (2)- Answered in negative. 16. This ruling is valid only within the jurisdiction of Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103 (2) of the CGS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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