2022 (4) TMI 1344 - AAR - GST

Trade Discount or not - Incentive received from Intel inside US LLC under Intel Approved Component Supplier Program (IACSP) - If not considered as Trade Discount then whether it is consideration for any supply or not? - export of service or not - HELD THAT - The applicant purchases the goods from the distributors and is not receiving discounts from the said distributors. Therefore, there is no supply of goods or services or both from IIUL to the applicant, no sale transaction of goods in the instant case between the applicant and IIUL and hence, the 'incentives' received by the applicant from IIUL will not be covered under the provision of Section 15 (3). There is no way that the said 'incentives' can be treated as Trade Discount given by IIUL to the applicant because the supply of goods in respect of which the incentives are purported to be given are rendered by the distributors and not by IIUL - thus, the Incentive received from Intel Inside US LLC under Intel Approved Component Supplier Program (IACSP) cannot be considered as Trade Discount. If the incentives received by them are not considered as Trade Discount then whether it is consideration for any supply? - HELD THAT - It is seen that IIUL has appointed various distributors to sell the company's products in India and the applicant is not a distributor. If the distributors had given Trade Discounts to the applicant, maybe such a case could have been covered under Section 15 (3) of the GST Act, 2017. There is no such discount or incentive received by the applicant from the distributors from whom the impugned goods are being purchased for further sale down the line. The only reason for the applicant to receive incentives in the subject case appears to be for increasing the business of IIUL and therefore there appears to be a supply of services in the subject case since there is no supply of goods at all between the applicant and IIUL. Since some amount, in the form of incentives, is flowing from IIUL to the applicant, in the absence of supply of goods between the concerned persons it appears that IIUL is paying consideration (in the form of incentives) to the applicant for receiving marketing services which would augment the sale of Intel products in the country. Therefore, the said amounts received by the applicant cannot be considered as Trade Discounts received. Export of service or not - HELD THAT - In the instant case, the marketing services are provided in respect of goods which are made physically available by the recipient of services (i.e IIUL, through its distributors) to the supplier of marketing services (i.e. the applicant), in order to provide the services. Therefore, as per Section 13 (3) (a), the place of provision of services is the location of the supplier of services i.e the applicant, which is in India - the impugned supply does not qualify as export of services.

Summary

Issues Involved:
1. Whether the Incentive received from Intel inside US LLC under Intel Approved Component Supplier Program (IACSP) can be considered as Trade Discount.
2. If not considered as Trade Discount, then whether it is consideration for any supply.
3. If it is considered as supply, then whether it will qualify as export of service.

Issue 1: Whether the Incentive received from Intel inside US LLC under Intel Approved Component Supplier Program (IACSP) can be considered as Trade Discount.

5.3 The applicant contends that the Incentive received from Intel Inside US LLC under Intel Approved Component Supplier Program (IACSP) should be considered as Trade Discount as per the provisions of Section 15 of the CGST Act, 2017.

5.5.1 Section 15 (3) of the CGST Act, 2017 states that the value of the supply shall not include any discount which is given 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 after the supply has been effected, if 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.

5.5.2 The applicant purchases the goods from distributors and is not receiving discounts from the said distributors. Therefore, there is no supply of goods or services or both from IIUL to the applicant, no sale transaction of goods in the instant case between the applicant and IIUL and hence, the 'incentives' received by the applicant from IIUL will not be covered under the provision of Section 15 (3) mentioned above. The said 'incentives' cannot be treated as Trade Discount given by IIUL to the applicant because the supply of goods in respect of which the incentives are purported to be given are rendered by the distributors and not by IIUL.

5.5.4 In view of the above, the Incentive received from Intel Inside US LLC under Intel Approved Component Supplier Program (IACSP) cannot be considered as Trade Discount.

Issue 2: If not considered as Trade Discount, then whether it is consideration for any supply.

5.6.1 From the submissions, it is seen that IIUL has appointed various distributors to sell the company’s products in India and the applicant is not a distributor. If the distributors had given Trade Discounts to the applicant, maybe such a case could have been covered under Section 15 (3) of the GST Act, 2017. There is no such discount or incentive received by the applicant from the distributors from whom the impugned goods are being purchased for further sale down the line. The only reason for the applicant to receive incentives in the subject case appears to be for increasing the business of IIUL and therefore there appears to be a supply of services in the subject case since there is no supply of goods at all between the applicant and IIUL.

5.6.2 Since some amount, in the form of incentives, is flowing from IIUL to the applicant, in the absence of supply of goods between the concerned persons it appears that IIUL is paying consideration (in the form of incentives) to the applicant for receiving marketing services which would augment the sale of Intel products in the country. Therefore, the said amounts received by the applicant cannot be considered as Trade Discounts received.

Issue 3: If it is considered as supply, then whether it will qualify as export of service.

5.7.1 The applicant is rendering marketing services to IIUL since the main intention of the agreement between IIUL and the applicant is for increasing the sales of Intel Products.

5.7.2 For the present supply to qualify as export of service, the impugned transaction should be covered under the provisions of sec 2(6) of IGST Act which defines the term 'Export of Services’ as the supply of any service when the supplier of service is located in India; the recipient of service is located outside India; the place of supply of service is outside India; the payment for such service has been received by the supplier of service in convertible foreign exchange; and the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8.

5.7.3 From the submissions of the applicant, it is observed that clauses (i), (ii), (iv), and (v) are satisfied in the instant case. What is required to be seen is whether the place of service for the Incentives received is outside India. Section 13 of the IGST Act, 2017, states that the place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services.

5.7.5 In the instant case, the marketing services are provided in respect of goods which are made physically available by the recipient of services (i.e IIUL, through its distributors) to the supplier of marketing services (i.e. the applicant), in order to provide the services. Therefore, as per Section 13 (3) (a), the place of provision of services is the location of the supplier of services i.e the applicant, which is in India. Hence, we hold that the impugned supply does not qualify as export of services.

Order:

Question 1: - Whether the Incentive received from Intel inside US LLC under Intel Approved Component Supplier Program (IACSP) can be considered as Trade Discount?

Answer: - Answered in the negative.

Question 2: - If not considered as Trade Discount then whether it is consideration for any supply?

Answer: - Answered in the affirmative.

Question 3: - If it is considered as supply then whether it will qualify as export of service?

Answer: - Answered in the negative.