Order Date – 24 August 2023

Facts – 

• The Applicant, M/s. Orient Cement Limited, are engaged in the business of manufacture of Ordinary Portland Cement (‘OPC) & Pozzolona Portland Cement (APC). 
• In order to achieve sales and marketing objectives, the Company offers various promotional schemes ‘Monthly/ Quarterly Quantity Discount Scheme”, etc. Similarly, the company offers promotional schemes known as ‘Dealer White Goods Scheme”. They to issue gold coins and white goods to the dealers upon they achieve the stipulated filing of the material/ purchase target during the scheme  period.

Issue – 

• Whether the issue of gold coins and white goods would be regarded as goods disposed of by way of gift” and input Tax Credit is available on the same?

Order – 

• The AAR observed that the quantity of gold / white goods to be supplied by applicant is arrived at from the specified quantum of sales and payment of sale consideration i.e., marketing targets achieved by the dealers. Thus it is seen that achievement of marketing targets set by the applicant, is an inducement from the dealer or in other words non-monetary consideration paid by the dealers for the supply of gold / white goods by the applicant. Further since the transfer of gold / white goods from applicant to the dealers is made for a consideration, it is covered in the definition of ‘supply', more so when the definition of supply is an inclusive one.
• The term ‘assets” would definitely include the “inventory” and since these goods are procured in the course of business, would be covered under the scope of “business assets”. Nowhere in the Schedule I it is stated that these business assets should be capitalized. Hence as per entry 1 of the Schedule I, ‘permanent transfer or disposal of business assets where input tax credit has been availed on such assets” would cover the activity of distribution of white goods or gold as incentive and hence would be treated as a supply of such goods as per clause (c) of Section 7(1) of the CGST Act.
• The applicant is issuing these gold coins and white goods so procured as incentives as per the agreement reached between himself and the recipients. It is only issued subject to the fulfilment of certain conditions and stipulations. Gift is something which is given without any conditions and stipulations and hence the same cannot be covered under the scope of ‘gift”.
  • Since the goods are not given as gifts Section 17(5)(h) is not applicable to the present transaction. In view of the above, the input tax credit so claimed under section 16 does not become unavailable under section 17(5)(h) of the CGST Act. Given that the distribution of gold coins and white goods are treated as supplies and attracts the tax liability on such distribution, the input tax credit is not restricted under any of the provisions of Section 17 more so under section 17(5)(h) of the CGST Act.