TaxTMI 
TaxTMI 
2023 (6) TMI 777
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....iamond Plaza. 1^st, Swastik Cinema Compound. 391 D.B. Marg Lamington Road, Mumbai. Mumbai, Maharashtra. 400004. ("hereinafter referred to as "Appellant") against the Advance Ruling No. GST-ARA-59 2020-21 B-56 dated 27.04.2022, pronounced by the Maharashtra Authority for Advance Ruling (hereinafter referred to as "MAAR"). BRIEF FACTS OF THE CASE 3.1 M/s. MEK Peripherals (India) Private Limited (the 'Appellant') is a reseller of Intel Products. The Appellant is having their main place of business in the State of Maharashtra. 3.2 The Appellant is registered under the GST law at its place of business in the State of Maharashtra under the GSTIN 2727AAFCM5236L1Z6. Apart from the aforesaid; the Appellant is not registered in any other State in India. 3.3 The Appellant purchases the products from various Distributors who are registered under GST Law in their respective states. The distributors import the product from ''Intel inside US LLC" and sells to Appellant. The Appellant further sells the same product to various retailers. 3.4 The Appellant has entered into agreement with "Intel inside US LLC" herein after referred to as (IIUL) under Intel Authorized Components Supplie....
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....rounds. GROUNDS OF APPEAL 5. The Appellant, in their Appeal memorandum, have, inter-alia, mentioned the following grounds: The Incentive received from IIUL under Intel Approved Component Supplier Program (IACSP) is nothing but pre agreed Trade Discount: 5.1 The Appellant submits that Section 15 of the CGST Act, 2017 provides for Valuation principles under GST. The relevant portion of Section 15 is section 15(3) reproduced below for ready reference: 15.(3) the value of the supply shall not include any discount which is given- a. Before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and b. After the supply has been effected, if i. such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and ii. Input tax credit as is attributable to the discounts on the basis of documents issued by the supplier has been reversed by the recipient of the supply. 5.2 Thus, as per the plain reading of the said Section 15(3), the Appellant can consider the incentive received as trade d....
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....the start of every quarter. As per the said agreement, the Appellant is required to make purchases from the IIUL approved vendors and distributors only in order to be eligible for the incentives. The IIUL is further collecting data from its distributors on the supplies made to the Appellant under the IACSP program and accordingly calculating the incentive to be paid to the Appellant. Thus, there is a direct nexus from of the purchases made from the distributors and incentive received from IIUL. 5.7 The IIUL is not selling the goods directly to any reseller in India. The goods are sold through the distributors only. Thus, the Appellant is purchasing the goods from IIUL only through its distributors. Hence, the incentives received from IIUL is nothing but trade discount. 5.8 The Appellant further submits that, even if it is held that the goods are supplied by the distributors and incentive is given by IIUL. even then the said incentives are nothing but trade discount. There is no bar under the GST law or under the common law that trade discount should flow from the immediate vendor only. Even if the trade discount flow directly from original equipment manufacturer, still it sha....
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....tional incentive agreement, i.e. if the Appellant achieves the target as mentioned in the agreement, then IIUL shall provide the incentive. The said agreement in no way can be considered as a service agreement. If such an interpretation is given, then all target based discount agreements will be considered a service provided by one person to another. Hence, such and interpretation is not possible. Further, GST being a contract-based levy, the contract must specifically provide for any services to be provided by the Appellant to IIUL. The contract does not provide for any such service. 5.16 It is further submitted that if the interpretation of the MAAR is accepted, it will lead to an anomaly. For example, the Appellant is invested its own money and bought the goods. There is 100 percent chances that despite its best efforts, the Appellant would not be able to achieve the targets for incentives. Thus, there is not supply of service from Appellant to IIUL even though the said purchases are made under the same agreement, it is only when the incentive is paid that the element of service is cropped in as per the interpretation of the MAAR. Such an interpretation is not tenable in law.....
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....t any legal basis and contrary to factual matrix. The MAAR has failed to appreciate that, firstly there is no contract for any marketing of any goods belonging to IIUL. Secondly, the Appellant is themselves purchasing the goods and reselling the subject said goods in the market. Therefore, there is no service provided in respect of the said goods. It is a supply of goods and not supply of services by the Appellant. The MAAR has further failed to explain as to how trading in goods amounts to marketing of the said goods for the original manufacturer, if such an interpretation is adopted, any kirana store reselling goods for FMCG companies or any other manufacturer for that matter would be considered as a supply of marketing service to such FMCG companies or manufacturer. 5.21 The Appellant further submits that as regard the observations of the MAAR that the present facts of the case fall under Section 13 (3)(a) of the IGST Act, 2017 is also incorrect. They said clause provides that the place of supply in a case where services are supplied in respect of goods which are required to be made physically available by the recipient of service to the supplier of service or to a person act....
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....olved in the case, we would refer to the legal provisions relating to valuation of taxable supply, which are relevant to the case as under: 8.1 The value of taxable supply is governed by the provisions of Section 15 of the CGST/SGST Act. This section specifies that (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 taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; (b) any amount that the supplier is liable to pay in relation to such supply hut which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both; (c) incidental ....
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....rectly 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 assented 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. 9. The word discount hasn't been defined in GST law. Cambridge dictionary defines the word 'discount' to mean as "a reduction in the usual price", whereas as per Collins dictionary the word 'discount' to mean as "a reduction in the usual price of something". Where a discount is mentioned on the invoice's face, the discount may be reduced from the taxable value of the supply of goods. In the event the discount is not mentioned on the face of the invoice, the discount may still be reduced if- • The supplier and the buyer must have entered into an agreement that includes provision for the discount. • The discount is linked to a specific invoice. • Any input tax credit attributable to the discount must be reversed by the buyer or recipient of the supply. 9.1 Therefore, to qualify as a trade d....
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....of goods has taken place between the appellant and hence incentives will not be covered under the provisions of Section 15(3) of CGST Act, 2017. For the incentives to qualify as trade discount, an agreement between seller and purchasing party is a pre-requisite, the same is missing between the distributor and the appellant. Thus, the incentive received from the manufacturer is separate from the transaction undertaken by the appellant with the distributors. Further, the appellant has relied upon decision of tribunal in Sharyu Motors vs. Commissioner of Service Tax [2016(43) S.T.R. 158 (Tri. Mumbai)], and have contended that the incentives are a form of trade discount. However, the facts of the case are different from the case law cited. In said case, the incentive was directly flowing from seller (the manufacturer of car) to purchaser (the car dealers), which is not the case at present. Thus, the incentives received from IIUL is not a trade discount. 10. The second question raised by the appellant is that if incentives received by them are not considered as trade discounts, then whether it is consideration of any supply. To which MAAR held that in the absence of any supply of goo....
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....tel. 10.3 Thus, from the above, it can be conclusively held that the appellant is bound by the agreement to perform the following tasks:- (i) They will make their best efforts to sell and market the Intel products (ii) Assist Intel in implementing Intel's marketing campaigns (iii) Provide first-level technical product support. In lieu of the aforesaid services, the payout is being accrued to the appellant and not in the form of trade discount as claimed by them but in the form of supply of marketing as well as technical support services. 11. In response to the third question as to whether the supply would fulfill the condition of export of service. To which MAAR held that the transaction between IIUL and the appellant doesn't fulfill the condition of export of service as per the provisions of Section 2(6) of IGST Act. The MAAR held that the place of supply of service in the present case is outside India, hence, doesn't fulfill the condition of clause (iii) of Section 2(6) of IGST Act, 2017. Further, Section 13 of IGST Act, 2017 is used to the determine the place of service, which reads as under: 13(1) -(1) The provisions of this section ....