In Re: M/s. K.P.H. Dream Cricket Private Limited
GST
2018 (10) TMI 747 – AUTHORITY FOR ADVANCE RULING, PUNJAB – 2018 (18) G. S. T. L. 278 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, PUNJAB – AAR
Dated:- 20-8-2018
AAR/GST/PB/002
GST
NAVDEEP BHINDER AND G.S. BAINS, MEMBER
Present for the Applicant: Sh. Parveen Kashyap and Sh. Adarsh Gupta, Consultant of the firm
(Note: An Appeal against this order lies with the Appellate Authority in terms of Section 99 and Section 100 of the CGST Act, 2017 and Section 99 and Section 100 of the PGST Act, 2017 within a period of thirty days from the date of communication of this order.)
M/s. K.P.H. Dream Cricket Private Limited, Plot No. 372, Industrial Area, Phase-9, Mohali, SAS Nagar, Punjab-160062 hereinafter referred to as 'applicant' had submitted an application for advance ruling in form GST ARA-01 vide his letter dated 02.04.2018 received on 04.04.2018 seeking to know.
1. Whether free tickets given as “Complimentary Ti
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t were discussed at length. The consultants requested for adjournment for submission of documents. On their request. the case was adjourned with the directions to submit written submission by 30-07-2018. The applicant has sent written submission through e-mail received on 30-07-2018, which is reproduced as under:
Written submissions & synopsis by the Applicant in respect of application for Advance Ruling:
1. That, M/s. K.P.H. Dream Cricket Private Limited, (for short “applicant” or “KPH”), having its registered office at Plot No. 372 Industrial Area. Phase-9, Mohall, SAS Nagar, Punjab-160062 is a franchisee of Board of Control for Cricket in India (for short “BCCI”) for the purpose of establishing and operating a cricket team to participate in Indian Premier League T20 cricket tournament (for shod “IPL”), under the title of “kings XI Punjab”.
2. That IPL is a domestic professional Twenty-20 cricket tournament in India, organized by BCCI-IPL every year under the gaming rules as presc
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ther free tickets given as “Complimentary Tickets” falls within the definition of supply under CGST Act, 2017 and thus, whether the applicant is required to pay GST on such free tickets?
b. Whether the applicant is eligible to claim Input Tax credit (for short “ITC”) in respect of complimentary tickets?
In furtherance to our justification stated in our above stated application for Advance ruling, the Applicant wishes to submit following additional submissions with a request to be taken into consideration to decide the matter,
ADDITIONAL SUBMISSIONS
7. The Goods and Services Tax (GST) regime has introduced a concept of 'supply' as a taxable event and done away with the erstwhile taxable events of sale, service, manufacture etc. This inter-alia require fresh thoughts for treatment of various transactions and events.
8. While the term free supply' is not defined under GST law or the erstwhile indirect tax laws, a 'free supply' as the name suggests is a supply of goods or services
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elating to credit of free supply of services.
Free supply and its taxability under GST
9. Under GST, the incidence of tax is 'supply'. The term 'supply' has been defined in an inclusive manner under Section 7 of the CGST Act. What this effectively means is that the definition is not exhaustive, and there may be some supplies which are not specified within the definition of the term
10. The term 'supply' is defined to include all forms of sale, transfers, exchanges, barters etc. made or agreed to be made for a consideration in the course or furtherance of business. However, supplies between related persons or distinct persons (different offices of the same entity) in the course or furtherance of business even if not for a consideration are supplies (in terms of Schedule I to the CGST Act). As a result, free supplies between unrelated persons. cannot be said to 'supplies', therefore, not taxable. Whereas free supplies between related persons are 'supplies' and therefore, taxable.
11.
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wsoever described, of the other, shall be deemed to be related. ”
On perusal of above cited definition of the term 'related person', one may safely conclude that the applicant and the ticket holder (recipient) cannot be covered under any entry and thus cannot be said to a related person.
12. In light of the above stated legal provisions and discussion, it is view of the applicant that the activity of providing complimentary tickets without any consideration on account of courtesy/public relationship/business promotion would not fall under the definition of supply as given under Section 7 of the CGST Act, 2017 and Schedule I of CGST Act, 2017 and thus not exigible to GST.
Input tax credit
13. One of the major advantages sought to be achieved from implementation of GST is the removal of cascading effect by facilitating seamless flow of credit. The “statement of Objects and Reasons” to the Constitution (122nd Amendment) Bill, 2014, enacted as the Constitution (101st Amendment) Act, 2
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d.
15. As regards free supply of services, the CGST Act does not prescribe any credit restriction. Therefore, in view of the applicant even though the output (free supplies of) services are not taxed, there is no need for reversal of input tax credit.
16. Section 16 provides that every registered taxable person shall in the manner specified in section 44, be entitled to take credit of input tax charged on any supply of goods or services to him which are used or intended to be used in the course or furtherance of his business. In case any inward supply of goods and/ or services is used for non-business purpose, the credit thereon is not allowed. Therefore, section 17(1) provides that where the goods and/or services are used partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purpose of his business. Supply of complimentary tickets is pad and parcel of the business of the ap
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ness in a better and effective way, thus corresponding credit is allowed.
18. Section 17(2) provides that where the goods and /or services are used partly for effecting taxable supplies including zero-rated under this act or under the IGST Act, 2016 and partly for effecting exempt supplies under the said acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. Supply of complimentary tickets is not a supply in itself and thus cannot be said to be an exempt supply.
19. Further Section 17(3) provides that the value of exemption supply under sub section (2) shall be such as may be prescribed Reference to chapter V (Input Tax credit) of CGST Rules 2017, there is no valuation mechanism prescribed for free supplies. Explanation to Rule 42 of CGST Rules 2017 clarifies 'For the purpose of this clause, it is hereby clarifies that the aggregate values of exempt supplies and the total turnover shall
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lies and there is no revenue loss as such to the government. Similar observation has been made by Hon'ble Gujarat High Court in Para 17, in the case of Ruby Laboratories [Ruby Laboratories vs. Commissioner of Sales Tax on 26 November, 1970 (1971 27 STC 326 Guj]) = 1970 (11) TMI 90 – GUJARAT HIGH COURT.
22. If business promotion and advertisement expenses are not specifically excluded and are considered as 'in the course or furtherance of business' then in view of the applicant same treatment is available for free supplies.
23. following are some of the similar transactions wherein the question of claiming ITC for free supply of services could arise and have possible implications.
a. Free consultancy services by a lawyer/ chartered accountant
b. Complimentary movie tickets in a FM Radio show
c. First night free on Hotel booking on various online portals.
Thus if ITC is eligible for the above listed events, similar treatment should be available for free supplies of complimentary
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uld be claimed. The House of Lords held that where a direct link could be shown between the giving of those assets and consideration received by the taxpayer from persons other than the recipients, that the awards dinner had been organized as a self-supporting event, for which the ticket receipts were intended to cover the total cost including the provision of trophies; and that accordingly, the purchase of the tickets provided the consideration for the supply of trophies to the award winners and output tax was not payable separately by the company on that value.
Circular No. 47/21/2018-GST dated 8th June 2018
25. We, respectfully wish to bring to your notice that CBIC has issued a clarification vide Circular No. 47/21/2018-GST dated 8th June 2018 vide which it has been clarified that supply of FOC basis does not constitute a supply as there is no consideration involved It also clarifies that where FOC supply is made in the course o/ furtherance of business, there is no requirement
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14.08.2018, the applicant requested for withdrawal of the application attaching their letter dated 13.08.2018 which read as follows:
27. “We, M/S K.P.H Dream Cricket Private Limited, (for shod “applicant” or “KPH”), having its Corporate office at C-115, 1st Floor, L & T Elante Office, Plot No. 178/178A, Industrial & Business Park, Area Phase-I, Chandigarh 160002 is an IPL franchisee to participate in Indian Premier league T20 cricket tournament (for short “IPL”), under the title of “Kings Xl Punjab”
The applicant has filed an application under Section 97 of Central Goods & Services Tax Act 2017 (for short “CGST Act”) seeking an advance ruling. The questions for which advance ruling is sought are –
a. Whether free tickets given as “Complimentary Tickets” falls within the definition of supply under CGST Act, 2017 and thus, whether the applicant is required to pay GST on such free tickets?
b. Whether the applicant is eligible to claim Input Tax Credit (for shod “ITC”) in respect of c
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. Further, since the moulds and dies are provided on FOC basis by the OEM to the component manufacturer in the course or furtherance of his business, there is no requirement for reversal of input tax credit availed
The two questions on which we have sought advance ruling from your good office are the same which have been clarified by the above cited circular. ”
Discussions and findings:
We have carefully gone through the facts of the case, the contentions of the applicant and legal provisions relevant to the questions raised in the present application. It is interesting to note that after submission of the application, personal hearing and further additional submissions made by the applicant, after the applicant had been spiritedly arguing as to how handing out of complementary tickets would not amount to supply under the GST Act, 2017, the applicant suddenly withdrew his advance ruling application. It is also interesting to note that the applicant has cited the Circular No. 47/21/
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rder to him. In the present scenario, the applicant has withdrawn his Advance Ruling application while indicating that his case is similar to the case of an Original Equipment Manufacturer (OEM) which has been discussed by the said circular as not constituting a supply, and the 'concerned officer' has reached a conclusion diametrically opposite that the activity of the applicant of supplying complementary tickets free of charge would amount to supply. Therefore, allowing for withdrawal of the present application in terms of the applicant, without discussing the case on merits would not be in public interest. Hence, circumstances call for discussion on merits rather than allowing withdrawal, especially when both interested parties to the Advanced Ruling application hold contrary views. While, the said Circular dated 8.6.2018 clarifies the case of an OEM where he is providing Dies and Moulds owned by him free of cost to a component manufacturer, who further uses these to make components
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GST Act 2017 and the parallel section 7 of the Punjab GST Act 2017 which lays down the scope of supply.
4. As per Section 7(1)(a) 01 the CGST Act, 2017, the expression supply includes “all forms of supply of…. services ……as sale, transfer, barter, exchange, license rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business”
The word consideration has also been defined in Section 2(31) of the CGST Act as under:
“(a) any payment made or to be made, whether in money or otherwise, in respect of in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall n
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sons not receiving the 'complementary tickets' for availing the same services. This would also be in consonance of Rule 32 (6) of CGST Rules, 2017 which lay down that “(6) The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp. ”
The complementary ticket given by the applicant to various persons would certainly be covered by the term 'token' and 'voucher' which are both defined relatedly in the Oxford English Dictionary. On website https://en.oxforddictioners.com/defination/token token is defined as 'a voucher that can be exchanged for goods or services, typically one given as a gilt or forming part of a promotional offer'; and on website https://en.oxforddictioners.com/defination/token/voucher voucher is defined as a small printed piece of paper that entitles the ho
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luded in the expression 'supply'. Perusal of Schedule-I. however, shows that the present case would not fall into any of the four activities mentioned in Schedule l.
8. However, as per provisions of Section 7(1)(d), the activities referred to in Schedule II are to be treated as supply of goods or services and would be included in the expression 'supply' for the purposes of the CGST Act, 2017. Para 5 of the Schedule II deals with supply of services and lays down, in clause (e), that agreeing to the obligation to refrain from an act or to tolerate an act or situation, or to do an act would be treated as supply of services. It is noteworthy that provisions of Section 7(1)(d) read with para 5 of Schedule II do not mention the word consideration for qualifying the mentioned activities as supply of services. While 'consideration' is used as a factor to determine supply under Section 7 (1)(a), the word being mentioned in the said provision, it is absent from the provisions of Section 7(1)(d)
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by the applicant free of charge and the applicant is also agreeing to the obligation of doing the act of allowing entry to the complementary ticket holder to enjoy services being provided by the applicant when he issues such complementary ticket, Thus, it is seen that the activity of the applicant in issuing complementary tickets to persons is covered under each limb of para 5(e) of Schedule II of the CGST Act, 2017. Therefore, by this measure too, the activity of the applicant of providing complementary tickets free of charge to some persons for enjoying cricket matches would also be covered under the scope of supply as per section 7(1)(d).
9. In view of the above discussion and findings, it would be clear that the activity of the applicant of providing complementary tickets free of charge to some persons would be considered supply of service as per provisions of both Section 7(1)(a) and 7(1)(d) and would therefore be leviable to tax as per provisions of Section 9 of the CGST Act, 20
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sions of Section 16 of the CGST Act,2017. However it is clarified that the Input Tax Credit for which the applicant is eligible would be in the context of input and input service as defined in Section 2(59) and 2(60) of the CGST Act,2017 read with Section 16 wherein it is clearly mentioned that credit of input tax charged on any supply of goods or services or both has to be given 'to him' which are used in the course of his business. And would therefore not extend to services where the applicant himself is the service provider and leviable to an output tax for such outward supply. Therefore in the present case, the applicant would not be eligible to take credit on the tax leviable on supply of complementary tickets by him, but would be eligible to avail credit of input and input service going into provision of supply of the impugned complementary tickets.
11. Accordingly we pronounce the following Advance Ruling under section 98(4) of the CGST Act, 2017 and section 98(4) of the Punjab
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