GST payable on the amount received as a refund of discount or rebate from Castrol: AAAR

The Kerala Advance Rulings Appeals Authority (AAAR) has ruled that Goods and Services Tax (GST) is payable on the amount received as a discount refund or rebate from Castrol.

The appellant, Santhosh Distributors Kottayam, pays the tax due according to the value of the invoice issued and avails itself of the GST input tax credit shown on the incoming invoice that it received from the main company Castrol or from its dealer.

The appellant requested the advance ruling regarding the appellant’s tax liability for the transactions referred to herein and explained as above The appellant pays the tax due according to the value of the invoice issued by him and uses the GST entry credit indicated in the invoice entry they received from Principe Castrol, their stockist.

Yet another issue raised was whether the rebate offered by the main company to its dealers through the appellant was subject to tax under the GST laws; if the amount indicated in the commercial credit note issued to the appellant by the principal company results in a proportional write-off of the input tax credit. Is there a tax liability under GST laws on the appellant for the amount received as a discount or rebate refund provided by the primary company in accordance with the written agreement between the primary company and its dealers and also an agreement between the principal and the distributors.

The Kerala AAR ruled that the applicant / distributor was eligible to avail of the ITC stated in the inbound invoice he received from the supplier of the goods. It is established from the declaration of the applicant that the prices of the products supplied by the applicant are determined by the supplier and that the applicant has no control over the price of the products, so it is evident that the additional discount granted by the supplier through the claimant who is reimbursed to the claimant is to offer a special discounted price by the distributor / claimant to the customers and therefore the amount represents the consideration paid by the supplier of goods to the claimant distributors for the supply of goods by the distributor to the customer. Therefore, this additional discount reimbursed by the supplier of goods / main company the distributor is likely to be added to the consideration payable by the customer to the distributor to arrive at the value of the supply under article 15 of the law. CGST or SGST in the hands of the distributors. The supplier of goods issuing the commercial credit notes is not eligible to reduce its initial tax and, therefore, no beneficiary will be required to cancel the ITC attributable to the commercial credit notes that it has received from the supplier. The claimant is required to pay GST at the applicable rate on the amount received as a rebate / rebate from the primary business.

Injured by the decision, the applicant brought the present appeal before this appeal authority.

The coram of Shyam Raj Prasad and Anand Singh decided that the additional discount reimbursed by M / s Castrol was liable to be added to the consideration payable by customers or dealers to the appellant. The appellant is required to pay GST at the applicable rate.

“M / s Castrol issues commercial credit notes and therefore cannot reduce its initial tax. Thus, the appellant will not be required to cancel the ITC attributable to the commercial credit notes issued to it by Mr. / s Castro, ”observed the AAAR.

The appellate authority added that the appellant is required to pay GST at the applicable rate on the amount received as a refund of discount or remittance from M / s Castrol.

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