ITC can’t be claimed on GST paid on Inputs Services

October 26, 2021 By newtaxindia Off

ITC can’t be claimed on GST paid on Inputs Services procured to implement Promotional Scheme under ‘Buy n Fly’:

The Tamil Nadu Authority of Advance Ruling (AAR) ruled that the Input Tax Credit (ITC) cannot be claimed on GST paid on inputs services procured to implement promotional schemes under ‘Buy n Fly’.

The applicant, GRB Dairy Food Pvt. Ltd. has been engaged in the business of manufacture and supply of ghee and other products. They have their factory premises at Tamil Nadu and Karnataka having separate GST registration in both the States. The product groups of the applicant are classified into ghee, masalas. instant mixes and sweets. The products supplied by them are taxable under the Act and none of the products are either “Exempted” or “Nil rated”. They sell their products through various retail stores across the country and obtain substantial revenue from Export Sales too. With the objective of expanding the market share. the applicant launched a sales promotional offer to enhance sales of its products. The sales promotional offer was named as ‘Buy n Fly scheme. The scheme was valid from 80 April 2019 to 8th July 2019. This scheme is applicable for sales of Instant Mix, Masalas, ready to cat sweets and snacks. In other words, based on the quantity and value purchases made by retarders from sub stockists, the rewards fixed under the scheme would be awarded by the company to retailers.

The applicant has sought the advance ruling on the issue whether the GST paid on inputs/input services procured by the applicant to implement the promotional scheme under the name Buy n Fly is eligible for Input Tax Credit under the GST law in terms of Section 16 read with Section 17 of the CGST Act, 2017 and TNGST Act, 2017.

The coram of L.Latha and T.G.Venkatesh ruled that the GST paid on inputs/input services procured by the applicant to implement the promotional scheme under the name Buy n Fly is not eligible for Input Tax Credit under the GST law in terms of Section 17(5)(g) and (b) of the CGST Act, 2017 and TNGST Act, 2017