GST UPDATE

Desk of CA. Praveen Sharma Series- 504  Draft Reply against Notoce issued for GST on Discount Received

https://taxbotgpt.ai Ai powered try this for any query related to income tax and GST.

Login with Gmail.

Recipient`s Name]

[Recipient`s Position]

[Department Name]

[Address] [City, State, Zip Code]

Subject: Draft Reply against Notoce issued for GST on Discount Received

Dear sir,

We are writing in response to your query regarding the treatment of the discount received by us for achieving the turnover targets set by our supplier. We appreciate the opportunity to clarify our position on this matter.

As per provision of section 15(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.

As per our understanding and interpretation of the relevant GST laws and regulations, the discount received in recognition of achieving turnover targets should not be considered as consideration for the supply of services. Rather, it is a customary commercial practice aimed at incentivizing and rewarding business performance. This discount, commonly known as a post-sale or commercial discount, is provided by the supplier without any direct correlation to specific services rendered.

It is essential to emphasize that the discount does not alter the nature of the original supply transaction between us and our supplier. Our liability for GST is determined based on the consideration agreed upon for the supply of goods or services, as outlined in the relevant tax invoices and contracts. The discount received does not constitute an additional consideration for any specific supply of service but is rather a reduction in the overall price paid for the goods or services procured.

Furthermore, it is worth noting that the achievement of turnover targets, while indicative of successful business performance, does not constitute a distinct supply of service under the GST framework. The consideration received by us for our supplies remains unchanged, regardless of any incentives or discounts provided by our suppliers.

APPELLATE AUTHORITY FOR ADVANCE RULING, TAMILNADU in the case of MRF Ltd [2019] (AAAR-Tamil Nadu) held that a proportionate reversal of the input tax credit is not required to be done by applicant in case of a post purchase discount given by the supplier through the C2FO platform.

In light of the above, we respectfully disagree with the department`s opinion that the discount received should be treated as consideration for the supply of services. We believe that our interpretation aligns with the principles and provisions of the GST laws and regulations.

However, to ensure compliance and transparency, we are open to providing any additional information or documentation required to support our position. We remain committed to fulfilling our tax obligations diligently and in accordance with the applicable laws and regulations.

We trust that this clarifies our stance on the matter. Should you require any further clarification or information, please do not hesitate to contact us.

Thank you for your attention to this matter.

Sincerely,

[Your Name]

[Your Position]

Read more: https://www.edatabook.com/c-detail/3888

Check Draft reply of GST Notice and Appeal format in our EdataBook

Stay tuned and Save my number for any query +91-9871530610.

CA. Praveen Sharma 

https://www.linkedin.com/in/capraveensh