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Incentives as Discounts

Goods and Services Tax - GST - By: - CA Akash Phophalia - Dated:- 14-12-2017 - Section 15 states about the valuation principles under GST. Section 15(3) reads as under - Section 15(3) The value of the supply shall not include any discount which is given-
 (a) 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 (b) after the supply has been effected, if- (i) such discount is established in terms of an agreement ent .....

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ly when it is recorded in the invoices or linked with the invoices coupled with the fact that the input credit is duly reversed. Now let us understand the implication of GST on different kinds of prevailing discounts in the industry in the following paragraphs. Here we need to look the transaction from two perspective. Firstly, whether the GST is reversible on the discounts or incentives received. Secondly, whether the incentive or discount in itself is an independent consideration for and indep .....

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e price in the invoice itself. Therefore, the said trade discount is admissible as deduction from the sale price and no GST is required to be paid on such trade discount. In the case of Orient General Industries Ltd v/s Collector of Central Excise, New Delhi 1984 (12) TMI 303 - CEGAT NEW DELHI, it was held in para 13 that the Lordships of Supreme Court have permitted the deduction of discount allowed in the trade by whatever name such discount is described having regard to the nature of goods pr .....

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t of goods or even after sale of goods. As the terms of such discounts itself says that these are directly linked to the invoices therefore such discounts are eligible for deduction from sale price and GST can be reversed on the value of such discounts provided that the input tax credit claimed is also reversed. Turnover discounts are generally given by various names. It can be turnover discount, special incentive, bonus incentive, performance discount etc. It is given on attainment of the targe .....

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ed in the judiciary. In Grey Worldwide (1) Pvt . Ltd v/s Commissioner of Service Tax, Mumbai 2014 (9) TMI 180 - CESTAT MUMBAI it was held that - It is seen and as correctly pointed out by the learned counsel that the coordinate bench of the Tribunal in the three cases as cited herein above, have held that the discounts/incentives received by the assesses from the print media will not be liable for service tax under the category of advertising agency services. If that be so, the said discount/inc .....

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ceived by an advertising agencyfrom the media without any contractual obligation to render any service cannot be levied to service tax under the category of BAS..........................…. Therefore, the confirmation of service tax demand on these amounts, i.e. volume discounts, rate different and amounts written back cannot be sustained in law and accordingly, we set aside the same. In Tradex Polymers Pvt. Ltd. Commissioner of S.T., Ahmedabad 2011 (12) TMI 398 - CESTAT, AHMEDABAD it was .....

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17 - CESTAT NEW DELHI - Business Auxiliary services - Target incentive - Depot Expenses paid by manufacture in pursuance of declared policy for achieving target in sales to authorised dealer - cannot be subjected to service tax under category of business auxiliary services or business promotion services provided to manufacturer - sections 65, 66 and 73 of finance act, 1994. [2016 (43) S.T.R. 158 (Tribunal) relied on]. [para - 6] In Toyota Lakozy Auto Pvt Ltd v/s CST Ex Mumbai I-II &V 2016 (1 .....

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of settled position in tribunal s decisions, discounts received on procurement of vehicles from manufacture not liable to tax as business auxiliary services - demand set aside - section 73 of finance act, 1994. [paras 3, 4] In the following cases the discounts are not allowed as deduction from the assessable value for paying excise duty, meaning thereby the discounts will form part of the assessable value as cost and is liable to tax in the hands of the person giving the discount and will not ag .....

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ine the quantum discount because it is based on a target figure to be found by the appellants at a future date. We are therefore of the firm view that the appellants are not entilled to any deduction on the ground of incentive bonus discount, which was contigent is nature. (b) In S.S. Miranda Ltd v/s Union of India 1985 (4) TMI 78 - BOMBAY HIGH COURT - Valuation - Trade discount - Surprise Incentives not known at or prior to the time of removal of goods but contingent upon customer s purchasing .....

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hat there was going to be any such incentive scheme since it was announced for the first time only by a circular dated 23rd May, 1983. Similar is the situation with regard to the period from July to October, 1983, for the incentive was announced for the said period only by the circular dated 1st November, 1983. The customer are, therefore, obviously unaware of any such incentive at the time they cleared their individual consignments during the said three months. The only period for which it can .....

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