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Case Law Details

Advance Ruling for GST on volume discount received
  

Legal Name of Applicant

Kwality Mobikes (P) Ltd. 

Details of Application

Advance Ruling No. KAR ADRG 76/2019 (In Judgment written as 76/2018)

Courts

 AAR Karnataka (155) Advance Rulings (1067)

Members of Bench

  1. Shri Harish Dharnia, Addl. Commissioner of Central Tax
  2. Shri Ravi Prasad M.P., Joint Commissioner of State Tax

Date of Judgement /Order

24/09/2019

Advance Ruling required for

  1. Whether the volume discount received on purchases is liable for GST? If yes, under which HSN/SAC?
  2. Whether volume discount received on retail (on sales) is liable for GST? If yes, under which HSN /SAC?
  3. Whether the Company has to issue taxable invoice to this effect?

Brief about Applicant:

M/s Kwality Mobikes Private Limited, ('Applicant') is a private limited company and is registered under GST Act, 2017. Applicant is in the business of supplying motor vehicles.

He is the authorised dealer for Harley-Davidson India ("authorised supplier"), who manufactures high end two wheeler motorcycles.

Applicant in its regular course of business purchases the vehicles from the authorised supplier wherein it charges 28% GST plus applicable Cess.

 

Brief about the Transaction:

Applicant is eligible for "Volume Discount" on retail i.e. Sales Commission and on purchases over and above the target is eligible for "Regular Volume Discount" (i.e. on purchases).

Harley-Davidson India issues Credit Note and this credit note is not affecting the purchase price or sale price and hence has no effect on GST collected in the invoices.

OBSERVATIONS

Applicant is eligible for "Volume discount" on purchases ,when makes more purchases and a credit note is issued by authorised supplier and no adjustment of price is made in respect of the goods already sold nor any adjustment of GST is made in the credit note.

Applicant is also eligible for the "incentive" when sells more than his target, which is provided by the authorised supplier in the form of a credit note without affecting the sale price of the goods purchased or sold.

 

Even this is in the form of incentive and no adjustment of price nor tax is done either by the applicant or the authorised supplier. Hence, the amount received by applicant is in the form of an incentive provided by authorised supplier and does not affect the sale price of goods already sold and hence there is no liability to charge GST on the same.

FFurther, the applicant is not providing any service to the authorised supplier and is only receiving the incentive. Indirectly, it has an effect on the sale price of the goods purchased by applicant from the authorised supplier and is actually in the form of discount.

Ruling

1. The Volume Discount received on purchases in the form of credit note without any adjustment of GST is not liable for GST.

2. The Volume Discount received on Retail (on sales) in the form of credit note without any adjustment of GST is not liable for GST.

3. Since the amount received in the form of credit note is actually a discount and not a supply by the applicant to the authorised supplier, the applicant need not issue tax invoice for this transaction.

Disclaimer: The contents of this article are solely for informational purpose. It does not constitute professional advice or a formal recommendation. No part of this article should be distributed or copied without express written permission of the author.

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