Incentives and Registration

[IMMANUEL NEIHSIAL]

Respected Sir,

I want to advice /suggestion on the following points

1. Whether services provided by the Dealer for registration of vehicles with RTO come under Business Auxiliary Services or not? Whether money charged from the purchaser of vehicle is wholly taxable or not?

2. Whether incentives/discounts received from the manufacturer of vehicles by the dealer for achieving a trade target is taxable or not?

With regards,

I. Neihsial, Siliguri

[KASTURI SETHI]

Query-wise reply is as under:-

1. Not taxable. It is a statutory function. The dealer must ensure that he must not charge more than the fee required to be deposited with the State Govt. Go through the following case laws which contains Board's Circular No.96/07/2007-S.T., dated 23-8-2007. This circular must be read carefully with the judgement.

2017 (47) S.T.R. 172 (Tri. - Chan.)= 2016 (9) TMI 588 - CESTAT CHANDIGARHSUKHMANI SOCIETY FOR CITIZEN SERVICES Versus C.C.E. & S.T., CHANDIGARH

2016 (45) S.T.R. 182 (Tri. - All.)  = 2016 (7) TMI 502 - CESTAT ALLAHABADINSTRUMENTATION LTD. Versus COMMISSIONER OF C. EX. & S.T., LUCKNOW

2017 (52) S.T.R. 429 (Tri. - Del.)  = 2017 (3) TMI 1019 - CESTAT NEW DELHID. PAULS CONSUMER BENEFIT LTD. Versus COMMISSIONER OF C. EX., NEW DELHI

STRONGLY IN YOUR FAVOUR

2017 (52) S.T.R. 303 (Tri. - Del.) = 2017 (3) TMI 117 - CESTAT NEW DELHISATNAM AUTO Versus COMMISSIONER OF CENTRAL EXCISE & S.T., MEERUT-I

[Ganeshan Kalyani]

Reply to query 1: It is government fees. If you charge exact amount of fees from the buyer then there is no tax.

Reply to query 2: Discount is connected to the first transaction of supply of vehicle by the manufacturer to the distributor. While supply vehicle the manufacturer has to pay GST. On giving discount they can reduce the GST provided in the credit note issued to distributor has GST component. And the distributor has to reverse the input tax credit already taken.

[Ganeshan Kalyani]

In my view, incentive is taxable u/s 15(2)(e) of CGST Act, 2017 which states "subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments."

[KASTURI SETHI]

The terms,'incentive', 'discount' and 'subsidy' convey the different meanings and message. All these cannot be correlated for the purpose of payment of GST. Each case has different facts and circumstances. It is in the interest of the querist that he should go through all the above case laws word for word and then decide where his situation fits in. I do not rule out the possibility of legal benefit in the form of incentive. Case laws will be helpful in arriving at correct and concrete decision.

Fool-proof solution cannot be provided on the basis of a simple query i.e. without going into the facts and circumstances of any case. Only guidance can be provided regarding in which direction one should go ahead.

AI Summary

Statutory fees non taxable: vehicle registration charges are not taxable if only government fee is collected. Registration services for RTO filing are a statutory function and are not taxable when the dealer only collects and remits the exact government fee; dealers must not charge more than the statutory fee. Incentives, discounts and subsidies from manufacturers require case specific analysis: discounts reflected by credit notes may reduce taxable value if GST is adjusted and the distributor reverses input tax credit, while subsidies directly linked to price may be treated as taxable under the valuation provision.