Incentive Received from retail Sale of Liquor

[gururaj Bhat]

Dear All,

One of the registered dealer is into retail sale of liquor in karnataka. All the liquor will be purchased through state govt breweries. On ordering certain quantity of liquor by the dealer, the liquor manufacturing company through their marketing agencies/distributors pay some discount to the dealer. Liquor Company will pay to marketing agencies/distributors then the agencies/distributors will credit the amount to the dealer bank account. No TDS is deducted for any transactions. There is no addition activity carried for this transaction nor there is a supply of goods or service. Is the amount received liable to GST? As the primary product is non gst supply, income derived from it is taxable under GST?

[Amit Agrawal]

You has said in the query that 'There is no addition activity carried for this transaction nor there is a supply of goods or service'.

Assuming that what dealer received is nothing but post-sale discount from original seller of liquor (such as turnover / target discount as per regular sales-schemes run by seller/s), there is no GST liability on the buyer receiving such discounts.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

Just to provide more clarity to my above post:

Even if amount so received by the registered dealer is called as 'Incentive' by the original seller of liquor (i.e. state govt breweries), still GST will not be payable, in my humble view, by registered dealer so long that he is able to prove that 'what is received is nothing but post-sale discount from original seller of liquor (such as turnover / target discount as per regular sales-schemes run by original seller/s)'.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[gururaj Bhat]

Thank you sir for your valuable advice.

Here the dealer is purchasing through State Govt brewery only. The reason is all liquor manufacturers should sell their products through state govt breweries & liquor retailer also should purchase from state govt breweries.

But the discount is received through bank transfer from marketing agencies/distributors of Liquor manufacturing company. The liquor company will pay to marketing agencies/distributors then they will transfer the amount to retailer. Still the amount recevied is exempted from gst? Pls advice sir.

[Amit Agrawal]

One needs to see underlying documents to understand legal implications of arrangement the registered dealer had with original liquor manufacturers (whose product, the dealer ultimately buys through from state govt breweries).

Generally specking, based on experiences I had till date, one should be able to demostrate that 'what is received by the registered dealer is nothing but post-sale discount from original manufacturer of liquor (such as turnover / target discount as per regular sales-schemes run by original manufacturers)'. In other words, as there was no supply of any goods / services from the registered dealer to the original manufacturer of liquor, there is no GST liability upon the registered dealer.

Having said that, Tax-Dept. may views these arrangements differently and they may like to levy GST on these so-called incentives.

One may take help from an expert in this field to defend the registered dealer, if felt so needed.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

*speaking

[gururaj Bhat]

Thank you sir for your valuable feedback.

[KASTURI SETHI]

Sh.Gururaj Bhat Ji,

You may call it incentive or bonus or discount or commission, if it is earned by way of purchase and sale of non-GST goods or exempted goods as agent/intermediary, GST is not payable on such amount.

[gururaj Bhat]

Thank you sir for your valuable advice.

AI Summary

Post-sale discounts on non-GST liquor sales not subject to GST when demonstrable, though authorities may challenge treatment.
Post sale discounts, turnover/target incentives or similar payments credited to a retail liquor dealer for purchases of non GST/exempt liquor are not taxable under GST where the dealer can demonstrate they are bona fide post sale discounts and there is no supply of goods or services by the dealer; routing of payments through marketing agencies or absence of TDS does not alone create GST liability, although tax authorities may challenge the treatment.