Profit sharing arrangements gst

[Madhavan iyengar]

A Company X in india exports its products ie goods to its holding company B in Germany at say ₹ 100 and the German company in turn sells them to its customers in Europe at ₹ 100 + margin

Now there is a arrangement between company X and its holding Company B In germany that of goods are sold above ₹ 100 /- then the excess of ₹ 100 will be shared between X in India and B in germany in ratio of 75: 25 is X will get 25% of the excess

Now this excess of 25% which X receives as per arrangement will it be non gst supply being a profit sharing arrangement

experts please clarify

[Ganeshan Kalyani]

In my view, GST is not applicable. This is because the amount is received toward export of goods.

[Mahadev R]

As it is towards export of goods, there should not be any GST impact.

[Madhavan iyengar]

Thanks for the replies

In case it is treated as consideration towards sale of goods then it has to be shown as zero rated supplies ie exports and disclosed in GST returns

But since it is a profit sharing arrangement whether it is a supply at all

[Ganeshan Kalyani]

In my view, it is 'other income' and not subject to GST. No need to show in GST return.

AI Summary

Profit sharing payments: treat as export consideration if linked to sale, otherwise classify as other income outside GST. Whether a post-sale profit-sharing payment is GST-taxable hinges on its characterisation: if it is additional consideration for the export of goods it forms part of the export consideration and is zero-rated, to be disclosed in GST returns; if it is an independent profit-sharing receipt not linked to the transfer of goods or services it may be treated as other income outside GST and not reported as a supply.