What was the question before AAAR in GRB Dairy Foods?

Whether GST paid on inputs/services used to give promotional rewards under the Buy n Fly scheme is eligible for ITC under Sections 16 and 17(5) of the CGST/TNGST Acts.

What did the authority decide about ITC?

ITC is blocked. Rewards given without consideration are treated as gifts/personal consumption; Section 17(5)(g) and (h) apply.

Why were the rewards seen as not for further supply?

They were consumed by retailers; the appellant became the final consumer, so inputs weren’t used in making taxable outward supplies.

Did pricing evidence affect the outcome?

Yes. No proof that reward costs were built into MRP; no MRP change was shown, supporting the view that rewards were without consideration.

What guidance does Circular 92/11/2019 give?

It clarifies that goods/services given away under such schemes are not ‘supply’; consequently, ITC on them is not available.

grb-dairy-foods-pvt-ltd-aaar-2021-buy-n-fly-itc

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Quick Summary

GRB Dairy ran a Buy n Fly promotion. Retailers who hit targets got rewards. The company claimed ITC on inputs/services used to procure those rewards. The authority held: No ITC. These rewards were given without consideration, count as gifts/personal consumption, and fall under the CGST Section 17(5)(g) & (h) block.

Issues

Is ITC available on inputs/input services used for Buy n Fly rewards under §16 read with §17(5)(g),(h) CGST/TNGST?

Rules

ITC is for inputs used in making taxable outward supplies (§16).
ITC is blocked for goods/services used for personal consumption (§17(5)(g)).
ITC is blocked for goods disposed of by way of gift/free samples (§17(5)(h)).
Circular 92/11/2019: promotional giveaways not treated as supply; hence ITC not allowed.

CGST Act, 2017 • TNGST Act, 2017

Facts (Timeline)

Timeline showing GRB Dairy Buy n Fly promotion and ITC dispute

Business: GRB Dairy manufactures and sells ghee & allied products (TN & KA registrations).

Promotion: “Buy n Fly” scheme to grow sales; retailers earn rewards upon targets.

Claim: ITC on goods/services purchased for rewards, citing nexus with business expansion.

Evidence gap: No proof reward costs were built into MRP; no MRP change shown.

Order: AAAR upheld ITC block—rewards given without consideration; treated as gifts/personal use.

Arguments

Appellant (GRB Dairy)

Rewards drive sales; expenses are in course of business.
Inputs/services have a direct nexus with taxable supplies.
Rewards given under scheme/contract, not gratuitous gifts.

Revenue / Authority

No consideration from retailers for rewards → gift/personal use.
Appellant is final consumer of reward inputs; §17(5)(g) applies.
Disposal by gift/free samples → §17(5)(h) blocks ITC; Circular 92/11/2019 supports.

Judgment

The AAAR held that ITC is not available on goods/services used to provide promotional rewards. With no evidence of consideration embedded in price and no change in MRP, the rewards were without consideration. Therefore, §17(5)(g) and §17(5)(h) block the credit.

Ratio (Core Principle)

Promotional rewards given free to retailers are not for further supply and amount to gifts/personal consumption; hence ITC is blocked under §17(5)(g),(h) CGST.

Why It Matters

Guides marketing teams on GST treatment of target-based rewards.
Prevents wrongful ITC claims on giveaways and loyalty gifts.
Exam-ready illustration of §17(5) blocks and Circular application.

Key Takeaways

Rewards without consideration → ITC blocked.
Retailer consumes reward → supplier is final consumer for ITC purposes.
Pricing evidence (MRP build-in) is crucial; lack of it hurts ITC claim.

Mnemonic + 3-Step Hook

Mnemonic: “GIFT?—NO ITC.”

GIFT to retailers is without price.
NO further supply—personal consumption.
ITC blocked by §17(5)(g),(h).

IRAC Outline

Issue: ITC eligibility on inputs/services used to give Buy n Fly rewards?

Rule: §16 permits ITC for taxable supplies; §17(5)(g),(h) block credit for personal use/gifts.

Application: Rewards had no consideration; no MRP build-in shown; retailers consumed the rewards.

Conclusion: ITC not available; rewards fall under §17(5) blocks.

Glossary

ITC: Input Tax Credit—credit of GST paid on inputs/input services used for making taxable supplies.
Consideration: Payment for a supply by recipient/other person; giveaways without price lack consideration.
Gift: Goods/services given without consideration; ITC blocked when disposed of this way.

Student FAQs

If rewards are given without consideration (gifts/free samples), §17(5)(g),(h) generally block ITC.

Only clear evidence that the cost is part of price for supply could change analysis; here, no such proof was shown.

Because the rewarded goods/services are not sold onward; they are consumed by retailers, breaking the supply chain for ITC.

Circular No. 92/11/2019 clarifies that promotional giveaways are not ‘supply’; hence ITC is disallowed.

Case Meta

CASE_TITLE: GRB Dairy Foods Private Ltd — AAAR (Order No. 36/ARA/2021, 30.09.2021)
PRIMARY_KEYWORDS: input tax credit, Section 17(5)(g), Section 17(5)(h)
SECONDARY_KEYWORDS: Buy n Fly scheme, Circular 92/11/2019, promotional rewards, Section 16 CGST
PUBLISH_DATE: 02 Nov 2025
AUTHOR_NAME: Gulzar Hashmi
LOCATION: India
Slug: grb-dairy-foods-pvt-ltd-aaar-2021-buy-n-fly-itc