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TMI Blog2018 (7) TMI 1761X X X X Extracts X X X X X X X X Extracts X X X X ..... such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus - STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE OUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. 1. M/s. UltraTech Cement Limited (hereinafter referred to as "the applicant") having its corporate head office at "B" Wing, 2ndFloor, Ahura Center, Ma ha kali Caves Road, Andheri (East), Mumbai-400093 is, inter-alia engaged in the manufacture and supply of cement and allied products (hereinafter referred to as "goods") which are taxable under GST law. 2. The applicant has obtained registration and holding valid registration certificate issued under Central Goods and Services Tax Act, 2017 ("CGST Act"). 3. The applicant is manufacturing goods at its manufacturing units located at, Taluka: Korpana, District Chandrapur, Hotgi- District Solapur, Mouda Distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the said dealer purchased the said bag of cement from the applicant at Rs. 300/-. The dealer is aware that there will be compensation in form of "rate difference" as per past practice. However, the dealers/stockists are not aware of the exact amou nt of compensation to be received from the applicant. 10. Based on the trade practice and past history, the dealer is aware that there will be compensation in form of rate difference in case of significant correction of prices 11. In order to provide relief to the authorised dealers/stockists in such scenario, the applicant pays a certain amount to the authorised dealers/stockists as 'rate difference' (Commonly known as 'Trade Discount' also). The aforesaid payment of rate difference by the applicant lo the authorised dealers/stockists is made by way of issuance of a credit note, which is linked to the sales/supplies made to the authorised dealers/stockists in a particular month. 12. The term trade discount is not defined in GST Act, but is defined in Corpus Juris Secundum, vol 26A page 974 as follows: "The term trade discount means the difference between the seller list price and the price at which he actually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction of compensating the authorised dealers/stockists on account of 'rate difference' is generally followed in the entire Cement Industry. 17. Section 15(1) of the CGST Act states that the value of supply for purpose of GST would be the "transaction value", which is the price actually paid or actually payable for such supply between unrelated parties, and where the price is sole consideration for supply. 18. Further, Section 15(3)(b) of the CGST Act states that, the discount provided after the supply has been effected shall be excluded from the value of supply subject to fulfilment of following conditions: * such discount is established in terms of an agreement entered into at or before the original supply; * such discount is specifically linked to the relevant supply; * input tax credit attributable to such discount has been reversed by the recipient. 19. Further, Section 34(1) of the CGST Act, inter alia, provides for issuance of credit note in respect of a supply of goods in case where the taxable value mentioned in the tax invoice is found to exceed the taxable value in respect of the supply. Section 34(1) of the CGST Act is reproduced as under - "34. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t scope of the term 'applicant', as defined under sub-Section (c) of Section 95 of the CGST Act shall include both, the person registered under the CGST Act and also the person who is not registered as on date of applying for the advance ruling, but is desirous of seeking registration under the CGST Act, in the state where advance ruling is sought. A.3 Further, Section 22 of the CGST Act, specifies the person liable for registration and reads as under:- "22. (1) Every supplier shall be liable to be registered under this Act in the State or Union territory. other than special category States, from where he makes a taxable supply of goods or services or both. if his aggregate turnover in a financial year exceeds twenty lakh rupees: ... Emphasis Supplied A.4 The above referred Section can be vivisected into following essentials: - a. A supplier shall be liable to be registered under CGST Act in the State or Union Territory, from where he makes taxable supply of goods or services or both; b. If the aggregate turnover in the financial year exceeds rupees twenty lakh. A.5 The Applicant submits that as on date, it is registered in Maharashtra and also making taxable supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax liability for goods supplied by the Applicant. A.8 Further, Section 96 of the CGST Act provides for appointment of advance ruling authority and reads as under:- "96. Subject to the provisions of this Chapter, for the purposes of this Act, the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory." Emphasis Supplied A.9 Hence, an Advance Ruling Authority appointed by the concerned State or Union Authority Government under concerned State or Union Territory Goods and Service Tax Act, shall be the deemed to be the Advance Ruling Authority for the purpose of CGST Act. The Section 96 of the Maharashtra Goods and Service Tax Act, 2017, reads as under:- "SECTION 96 (1) The Government shall, by notification, constitute an Authority to be known as the Maharashtra Authority for Advance Ruling: Provided that the Government may, on the recommendation of tlie Council, notify any Authority located in another State to act as the Authority for the State. (2) The Authority shall consist of- (i) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 According lo the applicant, Section 34(1) shall be road along with Section 15(1) of the CGST Act. The amount paid by the applicant to the authorised dealers/stockists' post supply of goods, effectively reduces the taxable value of the goods supplied by the applicant to such authorised dealers/stockists. Thus, the mechanism provided under Section 34(1) of the CGST Act shall also apply to the rate difference provided by the applicants to dealer's post supply. C.3 The applicant submits that the Section 15(1) of the CGST Act covers transaction value which is nothing but the price actually paid or actually payable for the supply of taxable goods. It is submitted that the concept of 'actually paid' or 'actually payable' of price to be received from the customer is to be determined at time of removal of goods from the factory of the assessee. In the case of the applicant, the consideration received from the authorised dealers/stockists after giving the effect of rate difference shall be treated as price "actually payable" by the authorised dealers/stockists for the supply of taxable goods in terms of Section 15(1) of the CGST Act. The value received by the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he return of the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person." The two things to be noted are that the rate difference mentioned by the taxpayer by no means can be considered as 'discount' under Section 15 of CGST Act, 2017 as same is neither declared nor known prior to supply of goods. Further in the event of revision of taxable value, taxable person can issue credit/debit note under Section 34 of CGST Act, 2017 read with Rules 53 of CGST Rule, 2017. 04. HEARING The case was taken up for Preliminary hearing on dated 04.04.2018 with respect to admission or rejection of present application, when Sh. Nirav Karia, Advocate, duly authorized appeared and was orally requested to submit copies of current agreements. No person was present from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant enters into an agreement with the authorised dealers/stockists for supply of goods on a principal-to-principal basis. Tlie agreement entered with the authorised dealers/stockists provides that the goods shall be supplied to the latter at the prices fixed by the applicant. Copies of agreement entered into between the applicant and authorised dealers/stockists are enclosed as (Annexure-1) collectively. 6. Further, the agreement also provides that the applicant shall provide various discounts to the authorised dealers/stockists at the rates as may be decided by the applicant alone, from time to time, by the authorised dealers/stockists in a particular month. 7. The applicant clears the goods to the authorised dealers/stockists under the cover of tax invoice after discharging applicable rate of GST on the said goods. 8. The authorised dealers/stockists further supply the goods manufactured by the applicant in the regional markets to the ultimate customers or retailers. 9. In certain cases, due to the highly competitive and dynamic market conditions, the authorised dealers/stockists of the applicants have to sell the goods purchased from the applicant, at a price lower t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing which arc reproduced in their submissions part have opined and claimed that the answer to both the questions that has been raised in their application are in the affirmative and the transactions as per facts stated in the application are allowable under Section 15 and Section 34 of the GST Act. In view of the above facts of the case and to examine the claims made by the applicant we find that Section 15 of the CGST Act reads as under:- Section 15:- (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 but which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er they directly or indirectly 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 associated 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. Here we find that Section 15(1) and Section 15(3) of the CGST Act are of specific relevance in the present case before us. We find that Section 15 of the CGST Act states that the value of 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 supply are not related and price is the sole consideration for the supply. We further find that Section 15(3) of the CGST Act states that the value of supply shall not include any discount which is given in ways as under:- (a) Any discount which is given before or at the time of supply if such discount has been duly recorded in the invoice issued in respect of such supply. (b) After the supply has been effected if (i) such discount is esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by crossed A/C payee cheque. Para 23 :- We Authorized Stockist is fully responsible to make due payments to the Company on due dates, as per agreed payment terms. In case of delay by the Authorized Stockist, interest at the rate 18% shall be imposed on the dues. And on a default of a period exceeding 90 days the Company may adjust the amount from the security deposit. Para 24:- The Company will pay Discounts at such rates as may be decided by the Company from time to time on the quantity sold to the Authorized Stockist in a particular month." We find that para 24 is in respect of discounts which states that the company will pay discount at such rates as may be decided by the company from time to time on the quantity sold to the authorized stockist in a particular month. Thus para 24 states that the company will further decide and pay discount at such rate after the quantity is already sold to the stockists. That the discounts are decided after the goods are already sold to the stockists, was confirmed by their representatives as well, at the time of the Personal Hearing. In view of this we find that the discount/rate difference being given by the applicant will have to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of which the quantum of discount to be given on the goods which have already been supplied is mentioned. Further the Applicant during the course of proceedings stated that they are further submitting copies of amendment No. 1 to the dealership agreements dated 20 June, 2012 which are effective with effect from 1st July, 2017 under GST regime and these amendments are executed in June 2017, We find that vide the above amendment to their agreements with their authorized stockists dated 20th June, 2012 as referred above, now vide their above referred amendment no. 1 they have put additional obligations on their authorized stockists/dealers which are reproduced as under:- 2. The Parties to this Amendment No.1 agree and confirm that the following terms shall stand incorporated under the Said Agreement from the Effective date: A. Additional Obligations of the Dealer 2.1 The Dealer shall file the monthly returns as required under the provisions of the GST Act. 2.2 The Dealer confirms and agrees that UltraTech at its sole discretion may operationalize various discount/incentive schemes ("Said Incentive Schemes") during the term of the said agreement. 2.3 In the event the Dealer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference as mentioned at Sr. No. 6 and 7 of the above referred GST Annexure for Mumbai region, there is no pre fixed criteria, basis or rationale for arriving at the quantum of these discounts neither as per basis mentioned in GST Annexure for Mumbai region nor as per amendments incorporated in agreements with authorized stockists as referred above. Thus we find that the amount paid to the Dealer towards "rate difference" and "special discount" as mentioned above, post supply are not complying with the requirements of section 15(3)(b)(i) of the CGST Act and therefore cannot be considered and allowed as discount for the purpose of arriving at the 'transaction value' in terms of Section 15 of the CGST Act. As the applicant's facts and case are not in compliance of the provisions of Section 15(3)(b)(i) itself, their procedural compliance in other respects is immaterial and not relevant. Various case laws referred to by the applicant in their submissions are in different context and are therefore not relevant in the present proceedings before this authority. 06. In view of the deliberations as held hereinabove, we pass the order as under: ORDER (Under Section 98 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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