In Re: M/s. K.K. Polymers (Prop. Advantage Agency Pvt. Ltd.)
GST
2018 (11) TMI 1264 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (19) G. S. T. L. 380 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, RAJASTHAN – AAR
Dated:- 13-10-2018
AAR No. RAJ/AAR/2018-19/20
GST
NITIN WAPA AND HEMANT JAIN MEMBER
Present for the applicant: Shri Hemendra Choudhary, CA (Authorised representative)
Note: Under Section 100 of the CGST/RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act 2017, within a period of 30 days from the date of service of this order.
The Issue raised by M/s. K. K. Polymers (Prop. Adventage Agency Pvt. Ltd) 201202, 2nd 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:
a. Classification of any good
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of goods to customers and receiver of payments). Collection of payment from customers is the responsibility of DCA.
1.2 Normally, Principal takes Bank Guarantee (BG) and / or Security Deposit against which principal assigns certain limit to the DCA in their system. Within that limit, DCA is allowed to place orders of the customers. At the end of the month, for the orders booked through DCA and goods supplied by the principal, DCA gets the commission from principal for which DCA raises invoices on the principal along with GST.
1.3 If payment is made directly by the DCA before due date (before 10 days credit period) on behalf of customer, the Principal gives Additional Commission to the DCA as per the agreement between Principal and DCA.
1.4 The role of the DCA is to promote the sale and book order and ensure payment to the principal in case of default from the customer. In the entire transaction, neither principal supplies the goods to DCA nor does DCA supply the goods to customers.
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osition to pay to principal on the due date, he approaches DCA to extend short term loan and the loan is extended by the DCA by making payment to the principal on behalf of the customer. The loan is repaid to DCA by the customer along with agreed interest.
1.8 If a customer makes the payment to DCA earlier than 10 days then the customer ask for the reimbursement towards early payment at a predetermined rate, as is being offered by the Principal.
2. 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 S
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3. Personal Hearing (PH)
3.1 In the matter personal hearing was given to the applicant. Mr. Hemendra Choudhary, CA (Authorised representative) of applicant appeared for personal hearing on 08.10.2018. During the PH he reiterated the submissions made in the application. He was requested to produce the copy agreement between the DCA and the Customers and also to produce billing commission papers between Reliance and the DCA within two days of hearing. He agreed to provide the documents and requested that the case may be decided on above submission at the earliest.
3.2 In this context, the jurisdictional officer submitted that work of DCA is basically to act as a mediator between the principal and the customer. Further as per policy the principal allows early payment incentives to their customers. As per Section 15(3) of CGST Act:
“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
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and Conclusion:
4.1 We have gone through the contents of the application filed by the applicant, submission made at the time of personal hearing and comments of the jurisdictional officer and find that the applicant and Reliance Industries Ltd. ( in short RIL) are in agreement vide dated 13.10.2017 for Agreement of Agency on Del Credere Basis. As per pricing policy of RIL dated 15.06.2018 regarding supply of goods for sale, the cash discount of Rs. 800/MT/Day is applicable on all grades except plant sweepings and waste grades and will be deducted from the basic price as per price Circular for payment of GST. Further, an additional bonus / discount of Rs. 80/ MT/ Day is available on early payment made by the applicant or the customer against such supplies made by the RIL, if such payment is made within 10 days of supply of the goods.
4.2 In normal course of supply between the Customer and RIL, RIL supplies the goods or services to the Customer. If the customer makes the payment again
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stomer agreement also. The applicant vide their letter dated 10.10.2018 submitted that there is no separate agreement with customer in relation to supply of goods or services from the RIL.
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.
4.6 The applicant also sought clarification if GST is
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