Businesses can claim ITC on Gold coins given as incentives to dealers, says GST AAR

The Karnataka Authority for Advance Ruling (AAR Karnataka) has ruled out that businesses can claim Input Tax Credit (ITC) on Gold coins given as incentives to dealers.

The Orient Cement Limited, Village Itaga, Malkhed Road, Taluka Chittapur, Kalaburagi-585292, have filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in FORM GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.

The question and ruling for the advance ruling are:

Question:

Whether the applicant’s obligation to issue gold coins and white goods to the dealers upon they achieving the stipulated lifting of the material/ purchase target during the scheme period would be regarded as “goods disposed of by way of gift” and Input Tax Credit (ITC) on the same would be restricted as provided under the Section 17(5)(h) of the CGST Act, 2017?

Whether the applicant’s obligation to issue gold coins and white goods to the dealers upon they achieving the stipulated lifting of the material/ purchase target during the scheme period would be regarded as a “permanent transfer or disposal of business assets where ITC has been availed on such assets” and would be treated as a supply even if made without consideration and be subjected to GST under Sl. No. 1 of the Schedule-I to the CGST Act, 2017?

Whether the applicant’s obligation to issue gold coins and white goods to the dealers upon they 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, 2017?

Ruling:

The applicant’s obligation to issue gold coins and white goods to the dealers/ customers upon achieving the stipulated lifting of the material/ purchase target during the scheme period would not be regarded as “goods disposed of by way of gift” and Input tax credit would not be restricted under the Section 17(5)(h) of the CGST Act, 2017.

The applicant’s obligation to issue 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 “permanent transfer or disposal of business assets where ITC has been availed on such assets” and would be treated as a supply even if made without consideration and be subjected to GST under Sl. No.1 of the Schedule I to the CGST Act, 2017 Orient Cement Limited Page 16 of 17.

The applicant’s obligation to issue 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, 2017.

For the official Ruling download the PDF given below: