How to claim receipt of business promotion expenses to be filed as exemption under GST

[Asked by Guest]

We have received incentive on sales from our principles. Also, during final calculation, our principals debit from the sales achieved, the amount in proportion to the percentage of incentive received. ( Say, if 10 lakhs is the sales incentive ( over and above normal operating discounts), this amount will be reduced to the extent in the subsequent year. Our Auditors say that this payment credit received to our account is taxable under GST and we are liable to pay now. When we enquired with our principals, they said that, they have raised credit note and debit note for the same and GST not charged . But returns are filed by the principals under the provision of exemption which falls under 0 % GST as per system.

We were informed that, under GST, principles are entitled to GST exemption for sales promotional offers ..

Please clarify and confirm.

[Yash Jain]

Dear Sir,

Its Very Much Simple - You are rendering "Service" against which you are getting "Incentive". This service is not in negative List (Please correct me – if the same is there, as I too have not viewed the same for some time)

So according to me , yes, you are liable to Pay GST.

As for Principle, for him, the GST you will charge will be Input, and hence if he get or does not get input he is safe, as the Liability to discharge GST on the said “Business Promotion – Revenue (From agents angle) is always on agent and not on principle

Hence either issue and Debit Note for taxes (Against CN As being received from Principle or Its better to Raise Invoice and File GSTR 1)/ GSTR 3B

In GST Even on Free Supplies (FOC Sales) GST is levied and hence the above transaction (Be it any nomenclature) is subject to GST.

Others Comments Highly Appreciable.

[DR.MARIAPPAN GOVINDARAJAN]

If any discount and incentives are given in the course of business, there shall be an agreement between them in this regard. If it is so the same should be indicated in the invoice. In such cases GST is not required to be levied.

[Ganeshan Kalyani]

There are conditions for credit / debit note.

AI Summary

GST on business promotion incentives: treat receipts as taxable consideration for agent services unless invoiced as agreed adjustments.
Receipts labelled as sales incentives paid to a recipient performing promotional or agency services are normally consideration for a taxable supply and attract GST, requiring the recipient to account for output tax and issue appropriate invoices or debit notes; the principal may claim input tax credit where available. Conversely, if incentives or discounts are governed by a pre existing agreement and properly reflected as invoice adjustments (credit/debit notes), they may reduce the taxable value and not constitute separate taxable receipts, making documentation and contractual terms dispositive.