SERVICE TAX ON INCENTIVES

[JOSHIL JAIN]

Dear Sir,

 

One of my clinent is getting  incentives on sales of Car such as Target incentives, Annual Incentives, Balance Score Card ( after annual evaluation) and Cash Back Scheme ( discount offered to customers and getting back from company) . Besides sales of car it also runs workshop and getting labour charges which is taxable service. Please advise whether all the incentives mentioned above are taxable or not after introudction of Negative List.

Thanks and best regards

[YAGAY andSUN]

Yes, these incentive are very well covered under 'BAS' and taxable under Negative list regime.

[CASeetharaman KC]

This is still a grey area and there are tribunal decisions where these target incentives have been excluded from service tax although the revenue has taken a stand that it is taxable under BAS. One such decision  is in the following case:

2006 (12) TMI 61 - CESTAT, BANGALORE

EURO RSCG ADVERTISING LTD. Versus COMMISSIONER OF C. S. T., BANGALORE

Other Citation: 2007 (7) S.T.R. 277 (Tri. - Bang.)

 

[JaysonJacob Mathew]

JOSHIL JAIN,

This is a highly disputable area. I had a similar case, by seeing the facts I presume your client is a dealer of maruthi vehicles.

 You need not pay any tax on incentive received from manufacturer, since the relationship between the dealer and manufacturer is of principal to principal relationship.

Incentives received by vehicle dealers is a discount, this  concept is not easily digested by ST people because they think discount is received directly on purchase .

You can refer these case laws

1) Tata motor insurance service ltd (2007 (8) TMI 638 - CESTAT BANGALORE)

2) Uttam Toyota  (2011 (1) TMI 728 - CESTAT, NEW DELHI )

3) Infinuim Motors (2011 (7) TMI 152 - CESTAT, AHMEDABAD)

AI Summary

Debate on Taxability of Car Sales Incentives: Business Auxiliary Services vs. Discount Argument Under Negative List Regime. A client receives various sales incentives related to car sales, such as target incentives and cashback schemes, and seeks advice on their taxability under the Negative List regime. One response asserts these incentives are taxable under Business Auxiliary Services (BAS). Another highlights that the taxability is contentious, citing tribunal decisions where such incentives were excluded from service tax. A third response argues that incentives are discounts and should not be taxed, referencing several case laws supporting this view. The discussion reflects differing interpretations and highlights the complexity of tax treatment for sales incentives.