TaxTMI 
TaxTMI 
2018 (7) TMI 1761
X X X X Extracts X X X X
X X X X Extracts X X X X
.... unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus - STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE OUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. 1. M/s. UltraTech Cement Limited (hereinafter referred to as "the applicant") having its corporate head office at "B" Wing, 2ndFloor, Ahura Center, Ma ha kali Caves Road, Andheri (East), Mumbai-400093 is, inter-alia engaged in the manufacture and supply of cement and allied products (hereinafter referred to as "goods") which are taxable under GST law. 2. The applicant has obtained registration and holding valid registration certificate issued under Central Goods and Services Tax Act, 2017 ("CGST Act"). 3. The applicant is manufacturing goods at its manufacturing units located at, Taluka: Korpana, Dist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mer at Rs. 295/- based on then prevailing market conditions even though the said dealer purchased the said bag of cement from the applicant at Rs. 300/-. The dealer is aware that there will be compensation in form of "rate difference" as per past practice. However, the dealers/stockists are not aware of the exact amou nt of compensation to be received from the applicant. 10. Based on the trade practice and past history, the dealer is aware that there will be compensation in form of rate difference in case of significant correction of prices 11. In order to provide relief to the authorised dealers/stockists in such scenario, the applicant pays a certain amount to the authorised dealers/stockists as 'rate difference' (Commonly known as 'Trade Discount' also). The aforesaid payment of rate difference by the applicant lo the authorised dealers/stockists is made by way of issuance of a credit note, which is linked to the sales/supplies made to the authorised dealers/stockists in a particular month. 12. The term trade discount is not defined in GST Act, but is defined in Corpus Juris Secundum, vol 26A page 974 as follows: "The term trade discount means t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate difference as (Annexure-21 & (Annexure-3) collectively. 16. It is submitted that the transaction of compensating the authorised dealers/stockists on account of 'rate difference' is generally followed in the entire Cement Industry. 17. Section 15(1) of the CGST Act states that the value of supply for purpose of GST would be the "transaction value", which is the price actually paid or actually payable for such supply between unrelated parties, and where the price is sole consideration for supply. 18. Further, Section 15(3)(b) of the CGST Act states that, the discount provided after the supply has been effected shall be excluded from the value of supply subject to fulfilment of following conditions: • such discount is established in terms of an agreement entered into at or before the original supply; • such discount is specifically linked to the relevant supply; • input tax credit attributable to such discount has been reversed by the recipient. 19. Further, Section 34(1) of the CGST Act, inter alia, provides for issuance of credit note in respect of a supply of goods in case where the taxable value mentioned in the tax in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icant" means any person registered or desirous of obtaining registration under this Act" ... Emphasis Supplied A.2 A perusal of the above clarifies that scope of the term 'applicant', as defined under sub-Section (c) of Section 95 of the CGST Act shall include both, the person registered under the CGST Act and also the person who is not registered as on date of applying for the advance ruling, but is desirous of seeking registration under the CGST Act, in the state where advance ruling is sought. A.3 Further, Section 22 of the CGST Act, specifies the person liable for registration and reads as under:- "22. (1) Every supplier shall be liable to be registered under this Act in the State or Union territory. other than special category States, from where he makes a taxable supply of goods or services or both. if his aggregate turnover in a financial year exceeds twenty lakh rupees: ... Emphasis Supplied A.4 The above referred Section can be vivisected into following essentials: - a. A supplier shall be liable to be registered under CGST Act in the State or Union Territory, from where he makes taxable supply of goods or services or both; b. If the aggrega....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds or services or both. The Applicant submits that the questions for determination in the instant advance ruling application concern both - (1) the determination of value of supply of goods by the applicant; and (2) what is the correct tax liability for goods supplied by the Applicant. A.8 Further, Section 96 of the CGST Act provides for appointment of advance ruling authority and reads as under:- "96. Subject to the provisions of this Chapter, for the purposes of this Act, the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory." Emphasis Supplied A.9 Hence, an Advance Ruling Authority appointed by the concerned State or Union Authority Government under concerned State or Union Territory Goods and Service Tax Act, shall be the deemed to be the Advance Ruling Authority for the purpose of CGST Act. The Section 96 of the Maharashtra Goods and Service Tax Act, 2017, reads as under:- "SECTION 96 (1) The Government shall, by notification, constitute an Authority to be known as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e recipient, in respect of the goods or services supplied. On the other hand, 34(1) of the CGST Act provides a mechanism for reduction in the GST liability of the supplier by issuance of credit note in case where the value mentioned in invoice is found to exceed the taxable values of such supplies. C.2 According lo the applicant, Section 34(1) shall be road along with Section 15(1) of the CGST Act. The amount paid by the applicant to the authorised dealers/stockists' post supply of goods, effectively reduces the taxable value of the goods supplied by the applicant to such authorised dealers/stockists. Thus, the mechanism provided under Section 34(1) of the CGST Act shall also apply to the rate difference provided by the applicants to dealer's post supply. C.3 The applicant submits that the Section 15(1) of the CGST Act covers transaction value which is nothing but the price actually paid or actually payable for the supply of taxable goods. It is submitted that the concept of 'actually paid' or 'actually payable' of price to be received from the customer is to be determined at time of removal of goods from the factory of the assessee. In the case of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed. (2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return of the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person." The two things to be noted are that the rate difference mentioned by the taxpayer by no means can be considered as 'discount' under Section 15 of CGST Act, 2017 as same is neither declared nor known prior to supply of goods. Further in the event of revision of taxable value, taxable person can issue credit/debit note under Section 34 of CGST Act, 2017 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le under the GST law. The goods manufactured at the applicant's various units are supplied by them to various authorized dealers/stockists located in the State of Maharashtra and also to authorized dealers/stockists situated in various other states. Further factual position as stated by the applicant in his application is as under:- "5. The applicant enters into an agreement with the authorised dealers/stockists for supply of goods on a principal-to-principal basis. Tlie agreement entered with the authorised dealers/stockists provides that the goods shall be supplied to the latter at the prices fixed by the applicant. Copies of agreement entered into between the applicant and authorised dealers/stockists are enclosed as (Annexure-1) collectively. 6. Further, the agreement also provides that the applicant shall provide various discounts to the authorised dealers/stockists at the rates as may be decided by the applicant alone, from time to time, by the authorised dealers/stockists in a particular month. 7. The applicant clears the goods to the authorised dealers/stockists under the cover of tax invoice after discharging applicable rate of GST on the said goods. 8. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the CGST Act. Q. 2 Whether the amount paid to authorized dealers towards "rate difference" after effecting the supply of goods would be allowed under Section 15(1) read with Section 34(1) of the CGST Act or under Section _15(3) read with Section 34(1) ibid. In respect of the above two questions, we find that the applicant as per their interpretation and understanding which arc reproduced in their submissions part have opined and claimed that the answer to both the questions that has been raised in their application are in the affirmative and the transactions as per facts stated in the application are allowable under Section 15 and Section 34 of the GST Act. In view of the above facts of the case and to examine the claims made by the applicant we find that Section 15 of the CGST Act reads as under:- Section 15:- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. (2) The value of supply shall include- (a) any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r directors of one another's businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent, or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family; (b) the term "person" also includes legal persons; (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. Here we find that Section 15(1) and Section 15(3) of the CGST Act are of specific relevance in the present case before us. We find that Section 15 of the CGST Act states that the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct the premises and records maintained by the Authorized Stockist and ask for any clarification in respect of the same from the Authorized Stockist. The Authorized Stockist shall also furnish to the Company any information, statistical or general, concerning demand, supply and prices of product in general. Para 22:-The Company shall sell and supply the Authorized Stockist the products at the prices fixed by the Company from lime to time. All payments against supplies will be made by the Authorized Stockist to the office of the Company by way of a demand draft or by crossed A/C payee cheque. Para 23 :- We Authorized Stockist is fully responsible to make due payments to the Company on due dates, as per agreed payment terms. In case of delay by the Authorized Stockist, interest at the rate 18% shall be imposed on the dues. And on a default of a period exceeding 90 days the Company may adjust the amount from the security deposit. Para 24:- The Company will pay Discounts at such rates as may be decided by the Company from time to time on the quantity sold to the Authorized Stockist in a particular month." We find that para 24 is in respect of discounts which states that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....statute can be construed to be having open ended discount with legislative intent. In view of the detailed discussions above now when we have a relook at para 24 of the Applicant's agreement with authorized stockists which states that the company will pay discount at such rate as may be decided by the company from time to time on the quantity sold to the authorized stockists in a particular month, we find that there is no basis or criteria or parameter (which may even be of personal relations nature between the parties to the agreement) mentioned in the agreement on the basis of which the quantum of discount to be given on the goods which have already been supplied is mentioned. Further the Applicant during the course of proceedings stated that they are further submitting copies of amendment No. 1 to the dealership agreements dated 20 June, 2012 which are effective with effect from 1st July, 2017 under GST regime and these amendments are executed in June 2017, We find that vide the above amendment to their agreements with their authorized stockists dated 20^th June, 2012 as referred above, now vide their above referred amendment no. 1 they have put additional obligatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for Mumbai region referred above, it can clearly be seen that the cash discount, price equalization, shoppee discount, quantity discount and annual discount as mentioned in the GST Annexure for Mumbai region at Sr. No. 1, 2, 3, 4, and 5 respectively are clearly complying with the requirements of the CGST Act and the criteria or conditions for availing discount as per Section 15(3)(b)(i) and (ii) of the CGST Act and the criteria or conditions for availing discount as per Section 15(3)(b)(i) are specifically mentioned as per agreement before hand. However we find that in respect of special discount and rate difference as mentioned at Sr. No. 6 and 7 of the above referred GST Annexure for Mumbai region, there is no pre fixed criteria, basis or rationale for arriving at the quantum of these discounts neither as per basis mentioned in GST Annexure for Mumbai region nor as per amendments incorporated in agreements with authorized stockists as referred above. Thus we find that the amount paid to the Dealer towards "rate difference" and "special discount" as mentioned above, post supply are not complying with the requirements of section 15(3)(b)(i) of the CGST Act and therefore canno....