Gold Coins and White Goods to Dealers on Achieving Sales Target are “Supply”, ITC Allowable: KAAR [Read Order]

The Bangalore bench of Karnataka Authority for Advance Ruling (KAAR) held that the distribution of gold coins and white goods to the dealers upon their achieving the stipulated lifting of the material/ purchase target during the scheme period are treated as supplies and eligible to claim Input Tax Credit (ITC) under Section 17(5)(h) of the Central Goods and Service (CGST )Act, 2017. 

Orient Cement Limited, the applicant was a Public Limited Company registered under the provisions of the Central Goods and Services Tax Act and as Karnataka Goods and Services Tax Act, 2017, and was engaged in the manufacturing of cement. 

The applicant had sought the advance ruling in respect of the issue was that whether the distribution of gold coins and white goods to the dealers upon their achieving the stipulated lifting of the material/ purchase target during the scheme period would be regarded as a supply under Section 7 of the CGST Act. 

T.R. Venkateswaran, the Chartered Accountant represented the applicant and submitted that the distribution of gold coins and white goods cannot be regarded as a permanent transfer or disposal of business assets as the said restriction in respect of only those assets which are capitalized in the books of accounts and not in respect of the revenue expenditure and the distribution cannot be regarded as a supply under Section 7 of the CGST Act as there was no consideration received by the applicant for such gold coins and white goods. 

Also submitted that gold coins and white goods distributed cannot be regarded as “Business Assets” and therefore the distribution of gold coins and white goods to dealers as part of promotional schemes cannot be regarded as permanent transfer or disposal of business assets where ITC had been claimed on such assets. 

The Authority observed that ITC should be allowed of the GST paid on procurement of gold coins and white goods which are given to dealers as part of the promotional schemes. 

The two-member bench comprising Ravi Prasad and Kiran Reddy held that the distribution of gold coins and white goods to the dealers/ customers upon achieving the stipulated lifting of the material/ purchase target during the scheme period would be regarded as a supply under section 7 of the CGST Act and eligible to claim input tax credit. 

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