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Performance bonus to dealers

25 March 2018

we are manufacturer of heavy commercial vehicles. for Promoting our sale. We are committed to our dealers that if they will sale more vehicle then company will reward the additional amount as a target achieved or Performance bonus. my query is that in addition amount which will receive by Dealers will parts of gst payments or not

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11 Replies

Pankaj Rawat (GST Practitioner) (55047 Points)
Replied 25 March 2018

Yes sure the GST is to be charged on CNT issued by u for performance bonus or incentives

as per section 15 CGST act

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Manas Das (1431 Points)
Replied 26 March 2018

dealer will raise bill for this on manufacturer. credit note may not be more appropriate

Pankaj Rawat (GST Practitioner) (55047 Points)
Replied 26 March 2018

Bill ???? , for what ????,. dear there is section 34 Cgst act , the credit note only to be issued in this case.

Manas Das (1431 Points)
Replied 26 March 2018

dear sir. sec 34 talks about credit note . when you can connect to a particular invoice . in this case it can't be connected to particular invoice. Yes one possibility manufacturer can issue credit note witjout reducing his GST liability. so that the dealer don't have to reduce his itc.

Pankaj Rawat (GST Practitioner) (55047 Points)
Replied 26 March 2018

Right Manas ji, but still CNT for turnover discount can be raise without GST charge therin , ( as per sec 15 Cgst act) ,

but in this case the Recepient can't issue the invoice for the same , isn't it...

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Venkatanarayana GM (Partner associate at Hiregange & Associates) (1279 Points)
Replied 26 March 2018

Dear sir,

Extract of consideration definition

“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: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;

Section 15 of CGST act

Extract

15. (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include––– (a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation.––For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy. (3) The value of the supply shall not include any discount which is given–– (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and

(b) after the supply has been effected, if— (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

My observations

If it is incentive/performance - Invoice to be raised charging GST

If it is discount (after supply) - There should be agreement and recipient should reverse the input tax credit.

Hope this clarifies your query.

Venkat

9972047758

venkat6688 @ gmail.com

Manas Das (1431 Points)
Replied 26 March 2018

Yes venkat I totally agree with you. and incase of discount after sale the supplier has to give GST credit note and recepient has to reduce his itc. in case of incentive the recepient has to raise a invoice charging GST

Venkatanarayana GM (Partner associate at Hiregange & Associates) (1279 Points)
Replied 26 March 2018

Thank you sir

Pankaj Rawat (GST Practitioner) (55047 Points)
Replied 27 March 2018

But sir why recelient will issue the invoices when he receiving the services as incentive from supplier ( on inward ) why cant a supplier issue a CNT in case of incetives ???, 2ndly supplier has to decide the incentive how much & to whom its given , because it s given by supplier , not by receipent, si in any case supplier will issue a cnt for such incentives.

In normal business ethic also no recipient issue invoice for incentive paid by supplier

Manas Das (1431 Points)
Replied 27 March 2018

Yes pankaj you are right . in normal business scenario the supplier will issue credit note but problem is he is not issuing credit note invoice wise . So he will not reduce GST liability. It means the money recipient earning goes out of GST. that's why we are in favour of recipient raising a GST invoice for inventive amount. your view is perfectly alright . But think what is tax implication when supplier not giving you credit note invoice wise