2019 (10) TMI 792 - AAR - GST

Levy of GST - rate of GST - volume discount received on purchases - volume discount received on retail (on sales) - Requirement for issuance of taxable invoice - HELD THAT - The applicant when makes more purchases is eligible for the volume discount on purchases and a credit note is issued by the authorised supplier and no adjustment of price is made in respect of the goods already sold nor any adjustment of GST is made in the credit note. The applicant is also not claiming any reduction in input tax credit already claimed by him as it does not affect the price of the goods sold. Hence, the amount received by the applicant is in the form of an incentive provided by the authorised supplier and does not affect the sale price of the goods already sold and hence there is no liability to charge GST on the same. Further, the applicant when sells more than his target is eligible for the incentive which is provided by the authorised supplier in the form of a credit note without affecting the sale price of the goods purchased or sold. Even this is in the form of incentive and no adjustment of price nor tax is done either by the applicant or the authorised supplier - Hence, the amount received by the applicant is in the form of an incentive provided by the authorised supplier and does not affect the sale price of the goods already sold and hence there is no liability to charge GST on the same. Requirement for issuance of credit notes - HELD THAT - The credit note issued by the supplier in the pertinent case does not have any effect on the value of supply and hence is only a financial document for account adjustment for the incentive provided. Hence there is no effect on the GST.

Summary

Issues involved:
1. Whether volume discount received on purchases is liable for GST?
2. Whether volume discount received on retail (on sales) is liable for GST?
3. Whether the Company has to issue a taxable invoice for volume discount transactions?

Analysis:
1. The applicant, a private limited company dealing in motor vehicles, sought an advance ruling on the liability of GST on volume discounts received on purchases and retail sales. The company, as an authorized dealer for a motorcycle manufacturer, receives volume discounts based on exceeding purchase targets. The authorized supplier issues credit notes for these discounts, which do not affect the sale price or GST collected in invoices. The applicant does not adjust input tax credit or claim reductions, as the discounts are incentives provided by the supplier and do not impact the sale price of goods already sold.

2. The Authority for Advance Ruling examined the transactions and concluded that the volume discounts received by the applicant, both on purchases and retail sales, in the form of credit notes without any adjustment of GST, are not liable for GST. These discounts are considered incentives that do not affect the sale price of goods, and therefore, there is no obligation to charge GST on them. The discounts are provided by the authorized supplier as financial incentives and do not alter the value of the supply or impact GST calculations.

3. Additionally, the ruling clarified that since the discounts received in the form of credit notes are categorized as discounts and not supplies by the applicant to the authorized supplier, there is no requirement for the company to issue a taxable invoice for these transactions. The credit notes issued by the supplier serve as financial documents for account adjustments related to the incentives provided, and they do not influence the GST implications. Therefore, the applicant is not obligated to issue tax invoices for these discount transactions.

In conclusion, the Authority for Advance Ruling determined that the volume discounts received by the applicant on purchases and retail sales in the form of credit notes without GST adjustments are not subject to GST. The discounts are considered incentives provided by the authorized supplier and do not impact the GST liability or require the issuance of taxable invoices by the company.