No GST on volume discount received on purchase & sale of vehicles without any GST adjustment: AAR
[Kwality Mobikes (P.) Ltd., In re [2019] 110 taxmann.com 369 (AAR - Karnataka)]
The applicant is engaged in the business of supply of motor vehicles. It is eligible for volume discount for sales and purchase of such vehicles on achieving the target. It has sought an Advance
Ruling to determine the applicability of GST on the volume discount received on purchase and sales of vehicles.
The Authority for Advance Rulings observed that the authorized dealer is issuing a tax invoice on supply of goods to the applicant on the basis of which applicant takes the ITC. The applicant is eligible for volume discount on purchases and sales made above the target specified for which a credit note is issued by the authorized dealer which neither adjusts price of goods already sold nor adjusts GST amount. The applicant is also not reducing ITC already claimed by it as it does not affect the price of goods sold.
As per GST provisions, discount given after the supply shall not be included in the value of supply if such discount is established in terms of an agreement before or at the time of supply and linked to relevant invoices. Further, the ITC attributable to discount on basis of document issued by supplier has to be reversed by the recipient. Since the credit note is issued as post-sale event and applicant has not reversed ITC attributable to discount received in the form of credit note, the criteria given under GST Act to exclude discount from value of supply are not fulfilled. In the given case, credit note issued by the dealer does not have any effect on the value of supply and is only a financial document for accounts adjustment for the incentive provided. Hence, there is no effect of GST. Therefore, volume discount received on purchase and sales in the form of credit notes without any adjustment of GST is not liable for GST.
[Kwality Mobikes (P.) Ltd., In re [2019] 110 taxmann.com 369 (AAR - Karnataka)]
The applicant is engaged in the business of supply of motor vehicles. It is eligible for volume discount for sales and purchase of such vehicles on achieving the target. It has sought an Advance
Ruling to determine the applicability of GST on the volume discount received on purchase and sales of vehicles.
The Authority for Advance Rulings observed that the authorized dealer is issuing a tax invoice on supply of goods to the applicant on the basis of which applicant takes the ITC. The applicant is eligible for volume discount on purchases and sales made above the target specified for which a credit note is issued by the authorized dealer which neither adjusts price of goods already sold nor adjusts GST amount. The applicant is also not reducing ITC already claimed by it as it does not affect the price of goods sold.
As per GST provisions, discount given after the supply shall not be included in the value of supply if such discount is established in terms of an agreement before or at the time of supply and linked to relevant invoices. Further, the ITC attributable to discount on basis of document issued by supplier has to be reversed by the recipient. Since the credit note is issued as post-sale event and applicant has not reversed ITC attributable to discount received in the form of credit note, the criteria given under GST Act to exclude discount from value of supply are not fulfilled. In the given case, credit note issued by the dealer does not have any effect on the value of supply and is only a financial document for accounts adjustment for the incentive provided. Hence, there is no effect of GST. Therefore, volume discount received on purchase and sales in the form of credit notes without any adjustment of GST is not liable for GST.
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