exclusive show room been treated as related party transaction

[suresh sathyamurthy]

Dear Expert

Our client is brand owner having own showroom and also has third party showroom, (wherein in Third party showroom is exclusive showroom owned by different proprietary firm/person/entity), in the third party showroom only our client product are been stored and sold, our client has shared some SOP on shop maintenance, staff, offers on products accordingly only third party has to make sales, on sales at third party stores, he gets his agreed commission and balance amount to be remitted to our client, with his commission he has meet out all his stores expenses and his profitability.

The issue is department contention is since Third party showroom follows the SOP and instruction of our client, they are treating Third party as related party transaction under section 15(5)

a) is department contention valid,

b) is there any ruling against the department contention please share

AI Summary

Debate on GST Law: Are Brand Owner and Third-Party Showroom Transactions Considered Related Party Transactions? A discussion in a forum revolves around whether transactions between a brand owner and a third-party exclusive showroom should be considered related party transactions under GST law. The brand owner supplies products to the third-party showroom, which sells them following the brand's SOPs. The department argues this setup constitutes a related party transaction, raising issues of valuation and ITC eligibility. Participants in the discussion express differing views on the department's stance, the applicability of circulars, and the relevance of an AAR ruling. The consensus suggests reviewing the agreement's terms to challenge the department's claims effectively.