24 January 2024
Are post sale discounts/incentives received through financial credit notes for prompt payment, target based discounts etc taxable under the hands of dealers who receive them?
Can it be treated as support service for enhancing the sales of the supplier and can the discount or incentive received be treated as consideration for the said support service?
The types of discounts or incentives are cash discounts, target based discounts, discounts for prompt payments etc. I have a view that these are not liable to be taxed at the hands of the recipient of the discount. However, if gst is being demanded on the said amounts on the grounds that
As per Section 2(17) "business" includes - (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
As per Section 2 (102) of the CGST Act,2017 "services" means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; As per Section 2(31) of CGST Act, 2017 "consideration" in relation to the supply of goods or services or both includes- (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 not include any subsidy given by the Central Government or a State Government:
In this case, these incentives are treated as consideration from suppliers for enhancing the volume of sales in the furtherance of their business. Such activity/transaction effected in the course or furtherance of business is a supply of service under Section 7 of the CGST Act. The nature of the above activity is classifiable under support services related to promotion of trading by receiving payment as an inducement for supply of goods in the course or furtherance of their business. As per Entry No. 453 of the Annexure to the Notification No. 11/2017 CT (Rate) dated 28.06.2017 the services is classified under 998599 as ‘other support services nowhere else classified’ and attracts 18% of GST.
Is this acceptable? What are strong grounds to clearly object this demand?
CAclubindia
