Question

Airtel is offering the following benefits at present to lure the customers. Anyone having a plan of Rs.799 per month is being given the following benefits.
1. Amazon Prime subscripion free worth Rs. 1000 (Subscription for 1 Year)
2. Neflix subscription free worth Rs. 1500 (Subscription for 3 Months)
3. Airtel TV Premium Access Free for Life (Period of Validity not known. Value not mentioned there. I too am not aware of the value)
4. Wynk Music Access free (Period of Validity not known. Value not mentioned there. I too am not aware of the value)
5. Rs. 2000 on New 4G Device. If the Airtel Customer buys a new 4G Android Mobile phone, a credit of Rs. 50 is given per month from the monthly Bill, for a period of 40 months. One need to MANUALLY USE the coupon at the time of payment of Bill.
6. Free Handset protection free for 1 Year (Value not mentioned there. I too am not aware of the value)
7. 2 Free Add-On Connection(s) (Value not mentioned there. I too am not aware of the value. But additional connections is available for Rs. 200 p.m.) Also additional discounts / coupons are available on payment via some specific wallets for each payment.
Query: What are the implications for the Recipient of Airtel Mobile Services in Case
a) The Recipient is Registered.
b) The Recipient is Unregistered
1. Whether the Recipient is saddled with any GST Law provisions in anyway or is liable for GST payments in anyway?
2. Now if the recipient is claiming the Mobile expenses as business expenses, Whether the recipient needs to reverse any Input Credit on Add-on connections, which he/she has given to family members for personal purposes, but for which no separate value is available as such.
3. If we have purchased a mobile making full payment and later on receives any coupon discount (in a single payment or in each month like Rs. 50 p.m. above) Whether we need to reduce the above from the Mobile cost or from the Mobile expenses? Whether any Input credit needs to be reversed proportionately for this coupon redemption?
4. If any cash back or coupon discount is received for using any specific payment route / method / wallet, then whether any input credit is reversible or not?

Answer

Illustration for your first question: Suppose Mr. A buys Airtel SIM card for Rs. 100, on 1st January, under the said scheme.
On 31st January he receives a bill of Rs. 799 as per the plan.
Answer:
TREATMENT OF 100 ON 1ST JANUARY

Case 1: If 100 is not refundable
Therefore this is the price of SIM.
As per section 2(74) this is a mixed supply because sim and the telephone services are artificially bundled with various free schemes. Therefore u/s 8 this shall be treated as supply of the highest rated component in the bundle.
==> Rs. 100 should be charged at highest rate out of all the components of the bundle.

Case 2: If 100 is refundable on closing of the connection
Therefore this is security deposit.
As per section 2(31) Security deposit does not form a part of consideration and therefore this is not chargeable to tax.
==> Rs. 100 not chargeable to tax.

Case 3: If 100 will be adjusted from the monthly bills
Therefore this is an advance payment for the service.
As per section 2(74) this is a mixed supply because sim and the telephone services are artificially bundled with various free schemes. Therefore u/s 8 this shall be treated as supply of the highest rated component in the bundle.
==> Rs. 100 should be charged at highest rate out of all the components of the bundle.

TREATMENT OF 799 ON 31ST JANUARY
As per section 2(74) this is a mixed supply because telephone services are artificially bundled with various free schemes. Therefore u/s 8 this shall be treated as supply of the highest rated component in the bundle.
==> Rs. 799 should be charged at highest rate out of all the components of the bundle.

IF BUYER IS REGISTERED PERSON
Then buyer is eligible for ITC provided that condition of section 16 are fulfilled.
POS and TOS shall be decided as per the highest rated component in the artificial bundle (section 8).

IF BUYER IS UNREGISTERED PERSON
Then buyer is ineligible for ITC.
POS and TOS shall be decided as per the highest rated component in the artificial bundle (section 8).

Illustration for your second question: Suppose Mr. A buys a Machine for business use and gets oil free with it. Machine cost is 10,000 GST rate = 12%. Oil cost is unknown and GST rate = 18%
Now Machine of 10,000 is chargeable at 18% (as per sec 8 mixed supply).
As per the recent circular 92/11/2019 it has been clarified in point B therein that such cases shall be treated as supplying two goods for the price of one. So this would mean that (machine+oil) is supplied for the price of 10,000. Therefore the ITC would be on both (machine+oil) and therefore both machine and oil shall pass the test on business use for full admissibility of ITC. If oil fails the business use test then proportionate ITC shall be disallowed.
Applying this principle in your question,
The phone connection along with all its free items shall be used in course or furtherance of business else propionate ITC shall be disallowed as per section 17(6) read with rule 42. The said rule also dictates how ITC shall be reversed if actual proportions for non-business are not available, like in your case.

Illustration for your third question: Suppose Mr. A buys a phone of Rs. 10,000 and uses a discount coupon (he got this coupon from earlier purchase of Airtel sim) of Rs. 2000 in lump-sum or installment and ends up paying Rs. 8,000 net of discount.
Since the consideration received by the company is only 8,000 and tax is to be paid on consideration accordingly GST shall be levied on 8,000 i.e net of discount.
Applying this principle in your question,
GST is to be levied on net of discount billed amount i.e monthly bill less Rs.50.

Illustration for your fourth question: Suppose Mr.A buys a phone for 10,000 and gets 2000 cash back from paytm on account of payment via paytm.
Here, invoice is raised for 10,000 by the vendor. Invoice is the supporting document for claiming ITC. Mr. A got cash back from Paytm, not vendor. So net cost to you is 8,000.
However GST laws are not concerned with "Net cost" to the buyer rather "consideration" received by the supplier. Practically Paytm has an agreement with the vendor by virtue of which Mr. A got the cash back. This transaction is a separate event and shall not be construed as a "discount" of the first transaction of buying the phone.
Applying this principle in your question,
ITC will be available on invoiced amount and ITC reversal is not needed.  (Reply dt.12/03/2019)