Tamil Nadu bench of GST Authority denies input tax credit to retailers on festive offers

Tamil Nadu bench of GST Authority denies input tax credit to retailers on festive offers

No rewards for traders who meet targets

The Tamil Nadu bench of the Goods and Services Tax (GST) Authority for Advance Rulings (AAR) has held that no input tax credit (ITC) would be available to manufacturers. It is for those, who purchased goods such as Dubai tickets, gold vouchers and home appliances for rewarding retailers who meet their targets.

The bench ruled that the retailers for their personal consumption would use the promotional rewards. "The rewards were not discounts on the products and hence, were termed as gifts," it said.

The crucial point for such a decision was that the rewards were announced based on the retailers stocking the targeted products and not on the sales made by the retailers, the AAR governed.

In order to boost their sales, manufacturers during the festive season, provide incentives to the end consumers by way of discounts and freebies. Additionally, they offer incentives to retailers to meet set targets.

Herein, GRB Foods, a Bengaluru, Karnataka-based private company that manufactures and supplies ghee, sweets, masalas and snacks, launched a 'Buy N Fly' scheme to enhance the sales of its products.

The company sought a ruling on whether GST paid on input services, including a trip to Dubai, gold vouchers, etc. that it purchased to implement the promotional scheme, was eligible for ITC.