GST Implication of Sale Price less than Purchase Cost

[Krishna Murthy]

A trader sells goods at a price which is less than the purchase cost of the same and thereby accumulates the ITC. He does this for achieving volume discount on purchases made by him. Such volume discounts are not subjected to GST as per AAR ruling in IN RE: M/S. KWALITY MOBIKES (P) LTD., 2019 (10) TMI 792 - AUTHORITY FOR ADVANCE RULING, KARNATAKA.

1. Can the trader carry forward such accumulated ITC and utilise the same for future GST liability? I guess there can not be a situation of refund since it does not fall under inverted duty structure.

2. Would this amount to subsidies directly linked to price as stated in Sec 15(2)(e).

[YAGAY andSUN]

Advance Ruling are judgments/order in Personam, therefore not applicable on everybody, however can be used as reference in other identical/similar matter. Please the facts of your matter vis-a-vis with this advance ruling and then take appropriate action within the frame work of law.

[Ganeshan Kalyani]

Why would someone sell goods below his purchase price? How will he meet his recurring expenses, if there is no margin?. Such question was asked by a tax officer in one of a case during pre-gst period.

However, to answer your query,

1) yes, you can carry forward the input tax credit and use it to offset against future liability.

[YAGAY andSUN]

Due to Covid-19, many traders/manufacturer are selling their goods less than of purchase price.

AI Summary

Input Tax Credit carryforward permitted where ITC arises from non taxable volume discounts, enabling offset against future GST liabilities. Accumulated Input Tax Credit arising from supplier volume discounts not treated as taxable consideration may be carried forward and utilised to offset future GST liability; advance rulings on non taxability are personam and require comparison of facts, and whether such concessions constitute a price linked subsidy affecting value is a fact specific determination.