ADDITIONAL BONUS PASSED BY DCA TO THE CUSTOMER NOT A SUPPLY UNDER GST– RAJASTHAN AAR

ADDITIONAL BONUS PASSED BY DCA TO THE CUSTOMER NOT A SUPPLY UNDER GST– RAJASTHAN AAR

RAJASTHAN AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX

Case Title- M/s K. K. Polymers

(GST AAR RAJASTHAN)

Advance Ruling No. RAJ/AAR/2018-19/20

Date of Judgement/Order-  13th October 2018

IMPORTANT PARAGRAPHS

The Issue raised by M/S K. K. Polymers (Prop. Advantage Agency Pvt. Ltd) 201202, 2 ^nd Floor, Girnar Colony, Gandhi Path, Vaishali Nagar, Jaipur- 302021 {hereinafter the applicant} is fit to pronounce advance ruling as it falls under the ambit of the Section 97 (2) (a) (b),(d),(e) and (g), given as under:

1. Classification of any goods or services or both;
2. Applicability of a notification issued under the provisions of this Act;
3. Admissibility of input tax credit of tax paid or deemed to have been paid;
4. Determination of the liability to pay tax on any goods or services or both;
5. Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

Further, the applicant being a registered person (GSTIN is 08AABCA2414Q2ZL, as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the application is ‘admitted‘ to pronounce advance ruling. 

QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT-

Applicant has sought ruling to be pronounced under section 97(2) (a) (b). (d), (e) and (g) of the CGST Act 2017, on the following questions:

1. The amount passed on to the customer by DCA on account of the early payment before credit period allowed by principal as referred in Para 8 of Sr. No. 12 (B) of the application (para 1.8 above). Whether any “supply” arises in this transaction? Who is the supplier and receiver in the transaction?
2. If yes, what will be the classification of such Supply and its HSN/SAC Code and applicable GST Rate?
3. If the transaction is termed as “Supply”, whether the aforementioned supply is exempted from Goods and Service Tax under CGST Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017, applicable w.e.f. 01.07.2017, as amended from time to time and corresponding Raj. GST Notification issued by Government of Rajasthan or any other notifications/rules under GST law?
4. If GST is charged by the customer on invoice for such transaction, Whether the dealer/DCA can take credit of the ITC of the GST charged on such supply considering the fact that dealer has outward supply as(i) Commission Agent Service on which GST is paid @ 18% (ii) the Finance in terms of Loan and advance on which interest income arises which is exempt under CGST Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017, applicable w.e.f. 01.07.2017, as amended from time to time and corresponding Raj. GST Notification issued by Government of Rajasthan?

Para No. 4.5 We are of the view that 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. When the reply of first question is in negative, there is no need to answer question No. 2, 3 and 4 of the applicant.

Para No. 4.6 The applicant also sought clarification if GST is charged by the customer on invoice for such transaction, whether the dealer/DCA can take credit of the ITC of the GST charged on such supply considering the fact that dealer has outward supply as (i) Commission Agent Service on which GST is paid @ 18% (ii) the Finance in terms of Loan and advance on which interest income arises which is exempt under CGST Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017, applicable w.e.f 01.07.2017, as amended from time to time and corresponding Rajasthan GST Notification issued by Government of Rajasthan. In this regard we find that 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

1. 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.
2. Not applicable.
3. Not applicable.
4. 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.