2018 (7) TMI 1761 – AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – 2018 (15) G. S. T. L. 455 (A. A. R. – GST) – Valuation under GST – Reduction on account of Discount – Section 15(3)(b) of the CGST Act – Whether the amount paid to authorized dealers towards “rate difference” after effecting the supply of goods by the applicant to aforesaid dealers can be considered for the purpose of arriving at the 'transaction value' in terms of Section 15 of the CGST Act? – Whether the amount paid to authorized dealers towards “rate difference” after effecting the supply of goods would be allowed under Section 15(1) read with Section 34(1) of the CGST Act or under Section 15(3) read with Section 34(1) ibid?
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Held that:- The discount from the value of supply can be allowed only if discount is in compliance of the provisions of Section 15(3) of the CGST Act, 2017 – 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 suc
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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 availing discount as per Section 15(3)(b)(i) are specifically mentioned as per agreement before hand.
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Ruling:- 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.
– ARA-34/2017-18/B-56 Dated:- 27-6-2018 – SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS (under section 98 of the Central Goods and Services Tax Act, 2017 and
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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 District. Nagpur, Rat
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de 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 lo 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 lo 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 authori
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ised 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 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 foll
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the department and make a request for provisional assessment. 14. From the above, it is clear that the trade discount is allowed as deduction from the transaction, value even if it is not separately specified. 15. At this point, it is important to emphasize that the applicant pays GST on the full value of invoice raised by them on the authorised dealers/stockists at the time of original supply of goods to the said authorised dealers/stockists. However, by issuance of credit note for rate difference, the sale price of goods sold by the applicant to the authorised dealers/stockists is reduced effectively to that extent. At this stage, we are enclosing the invoices issued by the applicant on the authorised dealers/stockists for supply of cement at full value and subsequent credit notes issued to the authorised dealers/stockists for reduction of sale price on account of rate difference as (Annexure-21 & (Annexure-3) collectively. 16. It is submitted that the transaction of compensatin
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lue 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 received from the cu
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containing the Applicant's interpretation of admissibility of input tax credit in respect of the aforementioned activities A. APPLICANT'S ELIGIBILITY TO FILE PRESENT ADVANCE RULING APPLICATION A.1 That the sub-Section (c) of Section 95 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act ), defines the term 'applicant' as under:-' applicant means any person registered or desirous of obtaining registration under this Act … Emphasis Supplied A.2 A perusal of the above clarifies that 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 und
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ection (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. Emphasis Supplied A.6 Perusal of the above clarifies that the advance ruling can only be sought on the issues, as arc specified under Section 97(2) of the CGST Act, which reads as under- 97. (1) An applicant desirous of obtaining an advance ruling under this Chapter may wake an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought. (2) The question on which the advance ruling is sought under this Act, shall be in respect of,-
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th – (1) the determination of value of supply of goods by the applicant; and (2) what is the correct 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 notificatio
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shtra Goods and Service Tax Act, 2017, the questions for determination in advance ruling lie before the Maharashtra Authority for Advance Ruling. A. 11 In view of the foregoing, the Applicant submits that it is eligible to file the present advance ruling application before the Maharashtra Authority for Advance Ruling, Mumbai, appointed vide Notification No. MGST-1017/CR 193/Taxation, dated 24.10.2017 read with Section 99 of Maharashtra Goods and Service Tax Act, 2017. QUESTIONS REQUIRING ADVANCE RULING B. The question on which Advance Ruling is sought by the Applicant is as under:- Whether the amount paid to authorized dealers towards rate difference after effecting the supply of goods by the applicant to aforesaid dealers can be considered for the purpose of arriving at the 'transaction value' in terms of Section 15 of the CGST Act. Whether the amount paid to authorized dealers towards rate difference after effecting the supply of goods would be allowed under Section 15(1) rea
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ded 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 applicant after giving the treatment of rate difference would be considered as price for arriving at the transaction value for the purpose of pa
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wards rate difference without taking the adjustment of same in the output tax liability of the applicant is becoming cost to the applicant due to absence of clarity in law. In this regard, it is observed that there is no any ambiguity in law as section 34(2) of the Central Goods and Service tax, 2017 provides the necessary legal provisions for adjustment of tax liability in case of issue of credit notes, after fulfilling the procedure as may be prescribed. In this regards, the relevant portion of the Section 34 of CGST Act is reproduced below, 34. Credit and debit notes. – (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 tax invoice is found to exceed the taxable value or tax 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
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ent 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
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opy of decision of Delhi Tribunal 2004 (177) ELT 816 Tri-Delhi) in case of Bee Pee Coating Ltd v. Collector of Central Excise, Vadodara. 05. OBSERVATIONS AND FINDINGS We have gone through the facts and various written submissions made by the Applicant and the Jurisdictional Officer during the course of the proceedings before us. We find that M/s Uitratech Cement Ltd. is registered under the GST Act and is engaged in the manufacture and supply of cement and allied products which are taxable under the GST law. The goods manufactured at the applicant's various units are supplied by them to various authorized dealers/stockists located in the State of Maharashtra and also to authorized dealers/stockists situated in various other states. Further factual position as stated by the applicant in his application is as under:- 5. The 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 au
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he 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 dealer has to sell a 50 kg bag of cement to ultimate customer at ₹ 295/- based on then prevailing market conditions even though the said dealer purchased the said bag of cement from the applicant at ₹ 300/-. The dealer is aware that there will be compensation inform of rate difference as per past practice. However, the dealers/stockists are not aware of the exact amount of compensation to be received from the
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riving at the 'transaction value' in terms of Section 15 of the CGST Act. Q. 2 Whether the amount paid to authorized dealers towards rate difference after effecting the supply of goods would be allowed under Section 15(1) read with Section 34(1) of the CGST Act or under Section _15(3) read with Section 34(1) ibid. In respect of the above two questions, we find that the applicant as per their interpretation and understanding 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 actua
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or before delivery of goods or supply of services; (d) interest or late fee or penalty for delayed payment of any consideration for any supply; and (e) subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Explanation.-For the purposes of this sub-section, the amount of subsidy shall he included in the value of supply of the supplier who receives the subsidy. (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 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 document issued by the supplier has been reversed by the recipient of the supply. (4) Where
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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 tim
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applicant needs to be examined as per Section 15 (3) (b) of the CGST Act. We find that the applicant has submitted, being representative samples, copies of agreements with authorized stockists in three cases being between: (i) Ultra tech Cement Ltd and Mr. Hariram Jangid entered into at Mumbai on dated 20 June, 2012; (ii) Ultra tech Cement Ltd and Mr. Kailash M Motani entered into at Mumbai on dated 20 June, 2012; (iii) Ultra tech Cement Ltd and Mr. Raju K Shah entered into at Mumbai on dated 20 June, 2012; In respect of all the three agreements which are representative samples, we find that para 21, 22, 23 and 24 which are exactly the same in all the three agreements and gives sale procedure and discount as under:- Para 21:- In respect of the sales made by the authorized stockiest it will maintain proper records and shall submit copies thereof from time to time as may be required by the Company, Vie Company through itself or its representatives shall have the right to inspect the pre
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ed 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 e
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mentioned in such an agreement without there being any parameters or criteria mentioned with it would not fulfill the requirement of Section 15 (3) (b)(i) of the CGST Act, as the word 'discount' if left open ended or without any qualifications or criteria attached can mean there can be any percentage of discount ranging from bare minimum to even 100% as per discretion of the supplier and certainly such abnormal discounts without any criteria or basis can in no way be considered as fair and at arm's length business transactions and no taxation statute can be construed to be having open ended discount with legislative intent. In view of the detailed discussions above now when we have a relook at para 24 of the Applicant's agreement with authorized stockists which states that the company will pay discount at such rate as may be decided by the company from time to time on the quantity sold to the authorized stockists in a particular month, we find that there is no basis or
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ations 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 in his books in the same month during which the Discount is given by UltraTech to the Dealer by way of aforesaid credit note. 2.6 The Dealer shall effectuate the reversal of credit in the monthly GST returns and shall fully comply with the provisions of the GST Act. 2.7 The Dealer accepts and agrees to indemnify and compensate UltraTech for the l
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ion of the terms of Additional obligations of the dealer as incorporated vide amendment no. 1 and GST Annexure for Mumbai region referred above, 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 availing discount as per Section 15(3)(b)(i) are specifically mentioned as per agreement before hand. However we find that in respect of special discount and rate difference 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 amend
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