No GST on extra packs of cigarettes supplied along with regular supply under single price

The AAAR, Uttar Pradesh in the matter of M/s Deputy Commissioner, CGST & C.EX. Division-2[Order No- UP/AAAR/01/2022 dated May 23, 2022] upheld the AAR order and stated thatGoods and Services Tax ("GST") shall not levied on extra packs of cigarette supplied along with regular supply.

Facts

M/s Golden Tobie Private Limited ("the Respondent") has engaged in the business of manufacturing cigarettes ("the Goods"). In order to grow the business, the Respondent had launched a new sale scheme wherein additional 30 packs of cigarettes will be supplied on buying 100 packs without receiving any extra consideration and filed an advance ruling, before the AAR, Uttar Pradesh to ascertain the tax liability on the extra packs of goods where it was held that the no GST would be levied on extra packs. Aggrieved by the ruling, the Deputy Commissioner, CGST, and Central Excise ("the Appellant") filed an appeal before the AAAR on the following grounds:

• Challenging the decision of AAR, wherein it was held that extra packs of cigarettes would not attract GST.
• Buy one get one free clause in the [Circular No. 92/11/2019-GST dated March 07, 2019- (Clarification regarding promotional scheme)] talks about only certain sections of trade and industry such as pharmaceutical companies, etc., and not about evasion prone commodity like cigarette and pan masala.
• The Respondent did not inform the Appellant that several alerts were issued against their firm by the department and that they are indulgedin claiming refund of accumulated ITC obtained through fraudulent means.

Issues

• Whether GST would be applicable on additional packs of cigarettes supplied by the Respondent in accordance with their sale scheme?
• Whether buy one get one free clause is applicable on the goods manufactured by the Respondent?

Held

The AAAR, Uttar Pradesh in[Order No- UP/AAAR/01/2022 dated May 23, 2022] has held as under:

• The "Buy One, Get One Free'' clause in the circular regarding Promotional Scheme does not talk or bar any particular commodity, rather it elaborates the scheme of "buy one get one offer".
• Further noted that, "buy one, get one free" is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can best be treated as supplying two goods under the price of one.
• Opined that, the authority for advanced ruling can only be rejected if the issue raised in the application has already been pending or decided in any proceedings.
• Observed that, the Respondent had informed about the alerts issued against their firm by the department and that they are indulgedin claiming refund of accumulated ITC obtained through fraudulent means, but it was nowhere objected by the Appellant that the question raised in advance ruling application is already pending in any proceedings.
• Held that, the AAR, Uttar Pradesh order is proper and needs no interference.