GST on Incentives recd

[Ethirajan Parthasarathy]

Petroleum Companies pay incentives (sort of quantity discount) for dealers, depending on their off take.

Are dealers liable to pay GST on such incentives received.

[KASTURI SETHI]

Dear Querist,

Incentive on what supply of goods by the Petroleum Cos. ?

As per Section 15 (3) of CGST Act, 2017, discount shall not be included into the transaction value for the purpose of payment of GST. Hence GST is not payable on the element of discount. Relevant portion of section 15 is appended below:-

(3) The value of the supply shall not include any discount which is given -

(a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and

(b) after the supply has been effected, if -

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

[DR.MARIAPPAN GOVINDARAJAN]

If there is an agreement between the buyers and the sellers in regard to incentive and the same is indicated in the invoice then no GST is applicable.

[CASeetharaman KC]

I agree with the views given by the experts.

This issue has also been a bone of contention during the erstwhile Service Tax Regime where there have been cases relating to Advertising Companies or Motor Vehicle Dealers etc where they have been given discounts based on the turnover achieved by them during the financial year . This discount normally is given after the end of the financial year. These discounts normally do not feature in Agreements and are generally decided by the company after the completion of the financial year based on their results.There are more than enough case laws in the erstwhile Service tax regime where attempts to charge service tax on incentives have been quashed by adjudicating authorities.

[rajkumar shukla]

I think Petro companies are still paying excise on petrol/diesel,

such quantity discounts are on sale basis ie sale of goods by companies.such discount are not being offered for any service given by dealers, it is on principal to principal basis, so no implication of service tax unless petrol pump is being run on commission basis and petro products belong to companies

AI Summary

Discount treatment under GST excludes qualifying incentives from taxable value when invoiced or agreed and ITC reversed. Incentives treated as discounts under Section 15(3) of the CGST Act, 2017 are excluded from taxable value when recorded in the invoice before or at supply; post-supply incentives are excluded only if established by an agreement entered into at or before supply, specifically linked to invoices, and the recipient reverses attributable input tax credit. Documentary evidence, invoice practice and ITC reversal determine whether incentives to dealers attract GST.