TMI Blog2018 (7) TMI 1761X X X X Extracts X X X X X X X X Extracts X X X X ..... e of discount has to be given in the terms of the agreement which is entered into at or before such supply. The wordings of Section 15 (3) (b) (i) very clearly states that quantum of discount is given after the supply of goods has taken place has to be there in the terms of such agreement i.e. it cannot be open ended not based on any criteria. Thus this discount quantum cannot be arrived at without any basis only at the discretion of the supplier. The supplier has to clearly mention the quantum of discount or percentage of discount which is to be worked out on the basis of certain parameters or certain criteria which may be agreed to between the supplier and the recipient and which are predetermined and mentioned in agreement in respect of supply of the goods. It can clearly be seen that the cash discount, price equalization, shoppee discount, quantity discount and annual discount as mentioned in the GST Annexure for Mumbai region at Sr. No. 1, 2, 3, 4, and 5 respectively are clearly complying with the requirements of the CGST Act and the criteria or conditions for availing discount as per Section 15(3)(b)(i) and (ii) of the CGST Act and the criteria or conditions for availin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 District. Nagpur, Ratanagari, Post-JNPT-Nava Seva- Navi Mumbai and Pune in the State of Maharashtra. Besides this there are plants situated in other States also. 4. The goods manufactured at the aforesaid units arc supplied by the applicant to various authorised dealer/stockists located in state where the above registration certificate is obtained and also to authorised dealer/stockists situated in different states. Apart from the same, the goods received from other States are also supplied to customers/dealers in the State. 5. The applicant enters into an agreement with the authorised dealers/stockists for supply of goods on a principal-to-principal basis. The 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sells goods to the trade a percentage deduction from the regular list or catalogue price of goods. 13. Therefore, the trade discount is the difference between the regular list or catalogue price and the actual price at which the goods are sold by the trader. At this stage, we refer and rely on the CBEC's excise manual of supplementary instruction, 2005 in Chapter 3, Part - III of Para 2.5(iv) has clarified as follows with regard to deduction of trade discount. (iv) discount of any type or description given on any normal price payable for any transaction will not form part of the transaction value for the goods, e.g. quantity discount for goods purchased or cash discount for the prompt payment etc. will therefore not form part of the transaction value. However it is important to establish that the discount has actually been passed on the buyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscount 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. (1) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that has invoice is found to exceed the taxable value or lax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed. 20. Even though the sale price of the goods sold by the applicant to the authorised dealers/stockists gets reduced subsequently due to rate difference, the applicant ends up paying GST on the total value mentioned in the original invoice issued to the authorised dealers/stockists as compared to the realization recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 supplies of goods from the same to its customers located in State of Maharashtra. Further, the turnover of the Applicant exceeds rupees twenty lakhs in the financial year. Given this, it is submitted that Applicant clearly satisfies to be 'applicant' in terms of sub-Section (c) of the Section 95 of the CGST Act. That sub-Section (1) of the Section 95 of the CGST Act defines the term 'advance ruling as under: - (a) advance ruling means a decision provided bit the Authority or the Appellate Authority to nn applicant on matters or on questions specified in sub-Section (2) of Section 97 or sub-Section II) of Section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) one member from amongst the officers of Central tax; and (ii) one member from amongst the officers of State tax, to be appointed by the Central Government and the State Government respectively. (3) The qualifications, the method of appointment of the members and the terms and conditions of their services shall be such as may be prescribed. A.10 The Applicant submits that in terms of the above referred Section 96 of the Maharashtra Goods and Service Tax Act, 2017, the Government of Maharashtra has issued a Notification No. MGST-1017/CR 193/Taxation dated 24.10.2017, which constitutes this authority as Maharashtra Authority for Advance Ruling. The Applicant subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply 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 applicant after giving the treatment of rate difference would be considered as price for arriving at the transaction value for the purpose of payment of GST in terms of Section 15(1) of the CGST Act. C.4 In such situation, the applicant submit that the Section 15(1) read with Section 34(1) of the CGST Act, it can assess the duty liability by reducing the amount equal to rate difference mentioned in the credit note given to the authorised dealers/stockists towards rate difference. C.5 The interpretation that the operation of Section 34(1) is limited only to the amounts which qualify as discount under Section 15(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans 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 the side of Jurisdictional Officer. The application was admitted and called for final hearing on 15.05.2018, Sh. Nirav Karia, Advocate, appeared and stated that they were making submissions in respect of details as asked for during preliminary hearing. However, he requested that since his senior was not available today, an adjournment is respect of final hearing be granted to them. Jurisdictional Officer Sh. Shivkumar Salunkhe, Dy. Commissioner CGST Central Excise Division, Chandra pur appeared and made written submissions and stated that they do not want any further hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 than their purchase price i.e. the price at which the goods are sold by the applicant to continue in business for the reason that the market for cement is very dynamic and the prices keep changing -not only on daily basis but on real time basis. Hence, it sometimes happens that the authorised dealers/stockists of the applicants have to sell the goods purchased from the applicant, at a price lower than their original purchase price to continue in business i.e. the price at which the goods are originally billed by the applicant. For eg. the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth 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 has been incurred by the recipient of the supply and not included in live price actually paid or payable for the goods or services or both; (c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST 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 established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices and (ii) input tax credit as is attributable to the discount on the basis of documents issued by the supplier has been reversed by the recipient of the supply. Thus we find that discount from the value of supply can be allowed only in the above two ways i.e. if discoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curity 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 examined for eligibility or otherwise, as per the terms and conditions given in Section 15 (3) (b) of the CGST Act referred above. We find that the discount that is given after the goods have been sold has to be established in terms of the agreement entered into at or before such supply i.e. the discount that is to be given afterwards has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 20 th 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 eligible for the said Incentive Schemes the Dealer shall be credited with the entitled discount/incentive, online. 2.4 UltraTech shall issue credit notes for discounts and the same shall be linked with the respective Tax invoices of UltraTech. 2.5 The Dealer agrees to reverse the corresponding input tax credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Central Goods and Services Tax Act, 2017 And the Maharashtra Goods and Services Tax Act, 2017) NO.GST-ARA-34/2017-18/B-56 Mumbai, dt. 27/06/2018 For reasons as discussed in the body of the order, the question is answered thus - Question. 1. Whether the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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