AI Drafter 
TaxTMI 
TaxTMI 
GST is levied on 'supply' of goods or services as per scope of 'supply' given in section 7 of CGST Act, 2017 which includes inter alia, all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course of or furtherance of business.
The issue of levy of Goods and Services Tax (GST) on rebate arising out of use of corporate card for payment of duty / tax was recently examined by the Authority of Advance Ruling of Karnataka (AARK, in short) in the matter of liquor manufacturer, M/s John Distilleries Pvt. Ltd., makers of liquor brand, Original Choice and others. John, headquartered in Bangalore having multi location producing facilities, is known for a unique portfolio of single malts, craft gins and popular blended whiskies, brandies and wines. [In Re: M/s. John Distilleries Pvt. Ltd. - 2026 (4) TMI 416 - AUTHORITY FOR ADVANCE RULING, KARNATAKA].
John's royalty incomes, scrap sales and availing of Goods Transport Agency (GTA) services are liable to levy of GST in India. In the instant matter, it had obtained a corporate card from bank for payment of excise duty which entitled it to a rebate of 0.515% based on total excise payments on a monthly basis. On doubt, it sought an advance ruling from the State AAR on 'whether rebates received from the bank for payment of excise duty through corporate card would amount to 'supply' and hence liable for payment of GST' ?
It was contended that 'money' is out of the scope of 'supply'. The liability to repay the loan arises from payment of excise duty via corporate card, constituting a pure money transaction outside the scope of Section 7 of the CGST Act, 2017. The rebate, being a financial discount or refund granted post-purchase without any immediate reciprocal consideration, does not satisfy the principle of quid pro quo. Accordingly, the levy of GST is not attracted.
The AAR interpreted the scope of 'supply' in the instant case by way use of corporate card payment for payment of duty by liquor brand manufacturer and observed that a supply necessarily requires the existence of consideration and a corresponding quid pro quo between the supplier and the recipient. In the present case, the rebate is granted by the bank as a post-transaction financial adjustment linked to the usage of the corporate card and is not attributable to any independent or identifiable supply of goods or services by the applicant to Bank.
Further, the rebate received by the applicant merely results in a reduction of the outstanding monetary liability payable to the bank. Such adjustment is in the nature of a transaction in money involving money, falling within the definition of 'money' under Section 2(75) of the CGST Act, 2017 and does not constitute consideration for any supply.
Reliance was also placed on Apex Court ruling in Union of India And Anr. Versus M/s. Intercontinental Consultants And Technocrats Pvt. Ltd. - 2018 (3) TMI 357 - Supreme Court, wherein it was held that the valuation of a taxable service must be confined strictly to the consideration paid as quid pro quo for rendering services. Thus, in the present case, since there was no identifiable consideration flowing as quid pro quo for any taxable supply, the essential requirement of consideration was not met, and consequently the transaction was held to fall outside the scope of levy of GST. It held that applying the same principle, the rebate in the present case does not represent consideration for any taxable service and hence cannot be brought to tax under GST.
It has been further held that the corporate card arrangement essentially facilitates a short-term credit for payment of excise duty, and the rebate granted operates as a discount in respect of such financial accommodation. Such transactions are squarely covered within the scope of the exemption vide Entry No. 27 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.
It was finally ruled that the rebates arise from the corporate card arrangement with the bank by the Applicant are merely transactions in money. Such rebates represent a monetary adjustment by the bank based on corporate card usage and do not involve any supply of goods or services. Therefore, such rebates do not form any supply of goods or services and are not liable to GST under the CGST/KGST Act, 2017.
This ruling is important for all corporates as using corporate card of bank for payments of taxes or duties is a normal business transaction which may result in financial incentives or rebates. To levy GST, it must be borne in mind that the necessary pre-condition of existence of consideration and a quid-pro-quo between the supplier and recipient must be present.
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