Tamil Nadu AAR: No ITC Claim on Inputs Procured for Promotional Scheme

The Tamil Nadu Authority of Advance Ruling (AAR) ruled that the Input Tax Credit (ITC) is not available on Goods and Services Tax (GST) paid on inputs obtained to implement promotional schemes. M/s GRB Dairy Food Pvt. Ltd. (applicant) has been engaged in the manufacturing and supplying ghee and other products. The applicant has factory premises in Tamil Nadu and Karnataka with separate GST registrations. The applicant classified the product groups as ghee, masalas, instant mixes and sweets. 

The products supplied by the applicant are taxable under the GST Act, and the products do not fall under either ‘Exempted’ or ‘Nil rated’ categories. The applicant sells products through various retail stores across the country, and it also exports the products. 

The applicant launched a promotional offer to enhance sales and to expand the market share. The applicant named the sales promotional offer the ‘Buy n Fly’ scheme. This scheme is applicable for sales of the instant mix, masalas, ready to eat sweets and snacks. The rewards that were fixed under the scheme would be awarded to retailers based on the quantity and value purchased from sub stockists. 

The applicant has sought the advance ruling on the issue of whether the GST paid on inputs and input services procured to implement the promotional scheme is eligible as ITC under Section 16 and 17 of the Central GST (CGST) Act and Tamilnadu GST (TNGST) Act.

The Coram of T.G.Venkatesh and L.Latha ruled that the GST paid on inputs and input services procured to implement the sales promotional scheme is not eligible for ITC as per Section 17(5)(g) and (b) of the CGST Act and TNGST Act.

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