TaxTMI 
TaxTMI 
Whether incentive received by the Distributor in the form of Foreign Tour from the Principal Supplier (say for eg. manufacturer) will be treated as Exempt Supply. If yes, then whether thre will be reduction of common ITC as per R/42?
Reversal of common ITC as per R/42 on Incentive received in Form of Foreign Tour
28 Dec 2024 
8 Replies 
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Exempt supply treatment: foreign tour incentives are generally non exempt, so reversal of common ITC under Rule 42 not required.
Foreign tour incentives paid by a principal to a distributor are treated as commercial discounts/incentives and not as exempt supplies; therefore, reversal of common input tax credit under Rule 42 generally does not arise. Classification for income tax (other income) or TDS deductions does not change GST treatment. Where the incentive takes the form of goods supplied by the principal, that transfer may constitute a distinct supply by the principal with separate GST consequences. (AI Summary)
Foreign tour incentives paid by a principal to a distributor are treated as commercial discounts/incentives and not as exempt supplies; therefore, reversal of common input tax credit under Rule 42 generally does not arise. Classification for income tax (other income) or TDS deductions does not change GST treatment. Where the incentive takes the form of goods supplied by the principal, that transfer may constitute a distinct supply by the principal with separate GST consequences. (AI Summary)