The Authority for Advance Rulings (AAR) in Telangana has made a significant ruling, stating that the distribution of gold coins, white goods, and discount coupons as incentives for sales will be treated as a supply of goods, and therefore, Goods and Services Tax (GST) will be applicable. This ruling has implications for businesses offering such incentives, allowing them to claim input tax credit (ITC) on the tax paid. Here’s a breakdown of the ruling and its impact.
Ruling on Incentives and GST
The AAR’s ruling clarifies that incentives like gold coins, white goods, and discount coupons provided to dealers and customers based on certain conditions are not to be considered as gifts. Instead, these transactions qualify as a supply of goods, as they are linked to sales performance or specific schemes. According to the AAR, GST is imposed on the supply of goods and services, even when they are provided as incentives.
Significance of the Ruling
This ruling holds significance for businesses that use such incentives to encourage sales. It allows them to claim ITC on the GST paid, which can have financial benefits. This decision also addresses a clause in the Central GST Act that restricts the claiming of ITC on gifts or free samples.
Balanced Judgment
Tax experts view the AAR’s judgment as balanced. While it acknowledges that incentives are not gifts, it also reiterates that any act undertaken in response to the inducement of goods or services is considered a supply. This decision aligns with the GST framework, ensuring that economic activities are subject to taxation where applicable.
