Service Tax on Target Based Incentive to dealers

[HCL Infosytems Ltd.]

Dear Sir,

My company is providing Desktop/Laptops to dealers for reselling and giving Percentage based incentive on Billing Value. Whether Service Tax is applicable on the incentive received by Dealer?

[MANDAVILLI RAMAKRISHNA]

Whether your dealers are charging for their normal business activity with your company. if so, now also ST to be charged. otherwise, this is only business promotion expenditure and not liable. 

In other words, if your dealers are getting commission from you regularly, then ST is levied. If the dealers are getting purchases from you normally and reselling the same, ST is not attracted on incentives also.

 

AI Summary

Service Tax Applies to Regular Commission-Based Incentives for Dealers, Not One-Time Business Promotion Expenses for Reselling. A company inquires about the applicability of Service Tax on target-based incentives given to dealers for reselling desktops and laptops. The response clarifies that if dealers are regularly receiving commissions for business activities with the company, Service Tax should be charged on these incentives. However, if the dealers are simply purchasing and reselling the products without receiving regular commissions, the incentives are considered business promotion expenses and are not subject to Service Tax.