Order Date – 30 September 2023

 Facts –

• The Applicant, M/s. Orient Cement Limited is engaged in the manufacturing and sales of Portland Cements and offers various promotional schemes to its dealers, including the distribution of gold coins and white goods.
• These promotional schemes are intended to boost sales, and the gold coins and white goods are provided to dealers based on the quantity of cement they purchase.

Issue –

• Whether the distribution of gold coins and white goods to dealers is considered "goods disposed of by way of gift", and whether Input Tax Credit (ITC) should be restricted?

Order –

• The AAR observed that the goods received as incentive are in proportion to the net points gained by the dealer relatable to the quantity of cement sold by them. From the light of the Section 7 of the GST Act and Clause (b) of sub-section (31) of Section 2, the transaction in the case of the applicant is one of supply of goods to his dealers in exchange for consideration.
• The applicant is inducing his dealers / stockiest to attain a particular level of business as a consideration for the goods to be supplied by him. Thus, the applicant is making supply of white goods and gold to his dealers or stockiest in return for the dealers or stockiest attaining a threshold of sales indicated in the scheme and therefore, the value of white goods and gold supplied by him are for the ‘act’ of achieving this threshold and therefore taxable in his hands.
• Hence the value of the goods supply is determined under Section 15 of the GST Act read with Rule 30 of the CGST Rules. The transaction is taxable as supply of goods therefore eligible for ITC.