The Karnataka Appellate Authority for Advance Rulings (AAAR) in the case of M/s. Page Industries Limited ruled that promotional goods/materials used by appellant in its brand promotion and product marketing can be considered as ‘inputs’ within the meaning of Section 2(59) of the CGST Act, 2017. However, it also ruled that input tax credit on such promotional goods/materials would not be eligible in terms of the provisions of Section 17(2) read with Section 17(5)(h) of the CGST Act, 2017.

The appellant in this case is engaged in the manufacture, distribution and marketing of knitted and woven garments under the brand name “JOCKEY” and swimwear and swimming equipment under the brand name “SPEEDO”. In terms of agreements with franchisees/ exclusive brand outlets the appellant is under a contractual obligation to provide promotional materials such as gondola racks, wall shelves, storage units, etc. On this point, on a perusal of the various provisions of the GST law, including scope of the term ‘supply’, Schedule I transactions and various other definitions etc., the AAAR noted that supply of the said promotional items is without consideration and thus, in the nature of non-taxable supply/ exempt supply. Therefore, the AAAR held that GST paid on procurement of the aforesaid promotional items is not eligible for input tax credit.

Further in this case, the appellant also provides other promotional items such as carry bags, calendars, diaries, pens etc., embossed/engraved with the brand name to its franchisees, distributors and retailers for the purpose of giving away to the customers. On this point, the AAAR noted that this is also in the nature of non-taxable supply and the appellant is not eligible for input tax credit on the said promotional items. AAAR also noted that there is an additional disentitlement under Section 17(5)(h) which provides that goods which are disposed by way of gift are not eligible for input tax credit.