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Reversal of common ITC as per R/42 on Incentive received in Form of Foreign Tour
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....eversal of common ITC as per R/42 on Incentive received in Form of Foreign Tour<br> Query (Issue) Started By: - ANKIT SHAH Dated:- 28-12-2024 Last Reply Date:- 9-1-2025 Goods and Services Tax - GST<br>Got 8 Replies<br>GST<br>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....
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.... whether thre will be reduction of common ITC as per R/42? Reply By Shilpi Jain: The Reply: Not an exempt supply. Incentive is in the nature of a discount. No reversal of credit for the distributor. Reduction of common ITC? not clear in query. Reply By ANKIT SHAH: The Reply: If the incentive was received by way of a CN, then agreed that it is a discount. Here, the incentive is in the form o....
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....f a Foreign Tour on which TDS is deducted by the Principal Supplier which forms part of revenue in Form 26AS because of which it is taken under the head "Other Income"; hence the query whether such incentive which is booked under the head "Other Income" will be treated as Exempt Supplies under GST. If it is to be treated as an exempt supply whether the reversal of ITC on commo....
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....n expenditures in P&L A/c will be applicable as per Rule 42 of the CGST Rules? Reply By KASTURI SETHI: The Reply: 'Incentive' is called incentive irrespective of the mode of payment whether in kind or in cash or credit notes or in any other form. Reply By KASTURI SETHI: The Reply: The issue is not litigation-free. Recently one of my clients has received SCN on the incentive issue. Re....
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....ply By vijay kumar: The Reply: There is no supply by the distributor in the case of foreign tour done by him which is organized by the principal supplier as incentive. Hence the question of exempt supply does not arise, in my view and hence Rule 42 reversal will not arise. Reply By KASTURI SETHI: The Reply: I agree with Sh, Vijay Kumar Ji. SCNs are being issued regularly on the incentive issue....
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.... by the department. Reply By Shilpi Jain: The Reply: Incentive maybe monetary or non-monetary. If given in money terms, then instead of giving actual money a credit note is issued. Say in case, instead of giving a trip, if some goods (say a car) was given to the distributor. In that case, it would be in the nature of supply by the mfr - though consideration is only the price that the distrib....
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....utor has already paid for the initial goods. Further this is as a part of obligation and cannot be treated as a gift. More like the clarification given for buy 1 get 1 free in a circular already issued by CBIC. In my view, no further tax liability , not an exempt supply and ITC should also be eligible. Reply By Shilpi Jain: The Reply: Also have a look at my article in the below link https://w....
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