Cos can claim credit for GST paid on dealer incentives: AAR

Mumbai, Sep 14, 2023

It is not just customers who look forward to the festive season in hopes of discounts and freebies - dealers, too, get target-based incentives, ranging from gold coins to white goods, from manufacturers. In a relief for manufacturers, they will be able to claim credit for the tax paid on purchase of such incentives.

The Authority for Advance Rulings (AAR), Karnataka bench, in the case of Orient Cement that offered target-based incentives to its distributors, has recently held that issuing gold coins or white goods to them on meeting their targets is neither a 'gift' nor a 'permanent transfer or disposal of business assets'.

In other words, the cement manufacturer would be able to claim a credit for the GST paid on purchase of coins or white goods against its own GST liability. At the same time, the AAR also held that transfer of goods under the incentive schemes will be a taxable supply.

"While advance rulings do not set a judicial precedent, they have a persuasive effect in tax assessments... to this extent the AAR ruling is a game changer," said Bipin Sapra, indirect tax partner at EY India.

[The Times of India]