Input tax credit— In this case, the appellants have sought for advance ruling as to whether the GST paid on inputs/input services procured by them to implement the promotional/ reward scheme by name called as “Buy n Fly” would be eligible for Input Tax Credit under the GST law in terms of Section 16 read with Section 17 of the GST Act.

It is their contention that these goods/services do not fall under 'gift' (Section 17(5)(h)) as the same was not given in volition, but on contractual obligation, on their retailers achieving the targeted sales nor these goods/services called as ‘goods/services used for personal consumption (Section 17(5)(g)).

The AAR pronounced the following ruling—

The GST paid on inputs/input services procured by the appellant to implement the promotional scheme under the name 'Buy n Fly' is not eligible for Input Tax Credit under the GST law in terms of Section 17(5)(g) and (h) of the CGST Act, 2017 and TNGST Act, 2017.

Section 16 of the CGST Act, 2017 empowers the taxpayer for entitlement of taking the tax charged on the Inputs as input tax credit on the goods or services or both supplied to him which are used or intended to be used in the course or furtherance of his business and such unbridled flow of input tax credit got restriction in Section 17 of the Act.

In the case at hand, the appellant has not procured the goods/services for further supply but for consumption by the retailers under the scheme and hence the cited example do not apply to the facts of the case as the appellant in the case at hand becomes the ultimate consumer of the said goods/services.

Held that— The input tax credit on the inputs and input services involved in the goods and services used for the purpose of reward is not available for the appellant and accordingly the ruling given by the Advance Ruling Authority of Tamil Nadu requires no intervention and the appeal is dismissed.