TAX LIABILITY ON PERQUISITES OR BENIFITS RECEIVED FROM SUPPLIER.

[BARUN MUKHERJEE]

Respected Experts,

A taxpayer is a reseller of mobile sets and received benefits from suppliers on which TDS has been deducted u/s 194R of Income Tax Act and reflecting under 26AS and credited the amount in his Profit & Loss Account. This is also to be noted that maximum of that amount was distributed to his debtors and the amount was debited in his Profit & Loss Account. Is there any tax liability under GST on above scenario..???

[Sadanand Bulbule]

What is the nature of benefit? and why? Plz elaborate.

[K.lakshmipati rao]

Dear Mr. BARUN MUKHERJEE

Please refer to CBDT Circular no. 12 of 2022, dated 16-06-2022 and Circular No 18 of 2022, dated 13-09-2022guidelines to give clarity on the deduction of tax at source (TDS).

[BARUN MUKHERJEE]

Sir, Performance based benefits was received by the taxpayer and maximum of the said benefits was also distributed to various buyers of him..

[YAGAY andSUN]

A mobile phone reseller received some performance-based benefits or incentives from their supplier. These benefits were mostly in cash and were related to business performance, like achieving sales targets. The supplier deducted TDS under section 194R, and the amount appears in the reseller’s Form 26AS. The reseller also recorded this income in their profit and loss account.

Now, most of this benefit was passed on to the reseller’s own buyers or debtors—maybe as discounts, schemes, or promotional offers—and this was also shown as an expense in the books.

So, the question is—does this have any GST impact?

Yes, there can be a GST liability on the benefit received from the supplier.

Here’s why:

• Even though income tax rules (as explained in CBDT Circulars 12 and 18 of 2022) ask for TDS on such benefits, GST looks at this differently.

• Under GST, if you get any amount from a supplier for promoting their sales or achieving targets, it's considered a service you’re providing to them—even if you didn’t raise a bill. This is treated like you supported their business.

• So, GST is likely payable on the amount received as a business service.

• Now, just because you passed on this benefit to your own buyers doesn’t mean GST won’t apply on what you received. That’s a separate leg of the transaction.

• However, if this entire thing was treated as a trade discount or price reduction (and properly shown in the purchase invoices), then GST may not apply—because it’s adjusted in the value of supply.

Final opinion:

If the benefit you got from the supplier was purely in cash and for hitting targets or pushing sales, then GST should be paid on it. It's best to raise a proper invoice to the supplier for this incentive and pay GST.

Passing on the benefit to your buyers doesn’t cancel out your liability—you just need to make sure the flow of money and treatment in the books is clearly documented.

[K.lakshmipati rao]

Dear Mr. Barun Mukherjee,

I request you to kindly clarify the following information for better understanding the GST liability.

Is there any pre-agreement between reseller[Taxpayer] of mobile sets and suppliers[OEM] for receipt of such benefits or incentives.

Whether supplier[OEM] issued any Financial/commercial Credit Note in the absence of Tax Invoice/Bill from reseller[Taxpayer]?

Does the benefit or incentive meant for reseller[Taxpayer] or meant for end user?

Does reseller[Taxpayer] is agent of suppliers[OEM] OR the working relationship between them as Prinicipal to Prinicipal basis?

[Ganeshan Kalyani]

As stated by expert - option 1 route it through credit note  and debit note considering as adjustment to the original supply. Or consider as fresh supply of supporting the sale and raise invoice.

[Shilpi Jain]

Whether the benefits were further distributed or not will have no bearing on GST liability, if any on the benefits received.

You may have to see if these benefits can be regarded as discount to keep it out of GST liability.

AI Summary

Mobile Phone Reseller Navigates Tax Complexities of Performance Incentives Under Section 194R Requiring Strategic GST Compliance A mobile phone reseller received performance-based benefits from a supplier, with TDS deducted under section 194R. The key issue is potential GST liability on these incentives. While the benefits were largely distributed to buyers, GST may still apply if the amount is considered a service provided to the supplier. The recommendation is to either route the transaction through a credit note or raise a proper invoice and pay GST on the received benefits.