2018 (11) TMI 1264 - AAR - GST

Supply or not - amount passed on to the customer by Del Creder Agent (DCA) on account of the early payment before credit period allowed by principal - supplier/receiver in the transaction - classification of such Supply and its HSN/SAC Code and applicable GST Rate - exemption under N/N. 12/2017 Central Tax (Rate) dated 28th June 2017, applicable w.e.f. 01.07.2017 - credit of the ITC of the GST charged on such supply. Held that - As per pricing policy of RIL dated 15.06.2018 regarding supply of goods for sale, the cash discount of ₹ 800/MT/Day is applicable on all grades except plant sweepings and waste grades and will be deducted from the basic price as per price Circular for payment of GST. Further, an additional bonus / discount of ₹ 80/ MT/ Day is available on early payment made by the applicant or the customer against such supplies made by the RIL, if such payment is made within 10 days of supply of the goods. The transaction made between DCA and the Customer for passing on the specified bonus given by the principal is nothing but an additional discount given for early payment made by the customer. In this case there is only one supply made by the principal to the customer. The additional discount relates to supply already made by the principal and passing on such bonus to the customers by DCA is in the nature of pure agent. However, any amount retained by the DCA on account of early payment is in the nature of supply made to the principal as business support services on which the DCA is already paying GST. ITC Credit on GST charged - Held that - The invoices can be issued by the supplier of the goods and services only - In the instant case, the customer is recipient of the goods supplied by the principal and any amount due to him can be adjusted by credit notes/ debit notes in relation to that supply. As the customer is recipient of the goods or services, he is not liable to issue invoices in respect of goods or services supplied by the principal. When there is no supply to DCA by customer, the DCA is not entitled to take ITC of GST passed on to the DCA in any manner. Ruling - The additional bonus passed on by the applicant (DCA) to the customer, is not in nature of a supply in accordance with GST Act, 2017. Since, the said transaction is not a supply by the customer; invoice cannot be raised/ issued by the customer and if any amount passes on to the DCA in any manner, the DCA is not entitled to take ITC of the said amount passed on by the customer.

Summary

Issues:
- Whether the applicant is eligible for an advance ruling under specific sections of the CGST Act.
- Clarification sought on the nature of transactions involving early payments and bonuses.
- Classification, HSN/SAC Code, and GST rate applicable to such transactions.
- Exemption from GST under specific notifications.
- Input tax credit eligibility for the dealer/DCA.

Analysis:
The applicant, a Del Creder Agent (DCA), acts as a mediator between the principal supplier and customers, taking orders and ensuring payment. The principal supplies goods directly to customers, with DCA receiving commission and additional bonuses for early payments made by customers. The DCA does not buy, store, or sell goods and only facilitates transactions. In cases of delayed payments, the principal charges interest along with GST. The DCA may extend short-term loans to customers and receive reimbursement for early payments made. The applicant sought clarification on whether passing on bonuses to customers constitutes a supply, classification, GST exemption, and input tax credit eligibility.

During the personal hearing, the applicant reiterated their submissions, emphasizing the nature of transactions and agreements. The jurisdictional officer highlighted that early payment incentives are part of the original supply between the principal and customer, not constituting a new supply. The Gujarat Authority for Advance Ruling also shared a similar view. The applicant's agreement with Reliance Industries Ltd. outlined cash discounts and additional bonuses for early payments. The DCA raises invoices for claiming bonuses and pays GST accordingly.

The ruling authority analyzed the transactions and concluded that passing on bonuses to customers does not constitute a separate supply but is part of the original supply between the principal and customer. The DCA acts as a pure agent in passing on bonuses, with any amount retained for early payments considered a supply to the principal. As the customer is the recipient of goods, the DCA is not entitled to claim input tax credit on amounts passed on by the customer. Therefore, the ruling pronounced that the additional bonus passed on by the DCA to customers is not considered a supply under the GST Act.

Overall, the ruling clarified the nature of transactions involving bonuses, the role of the DCA as a mediator, and the eligibility for input tax credit based on the specific circumstances outlined in the application.