NEW DELHI, Sept 13: Post-sale discounts given by manufacturers to dealers intended solely for competitive pricing and promoting sales will not be subject to GST, the Central Board of Indirect Taxes and Customs (CBIC) said.
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However, GST would be payable on such discounts if the manufacturer and the dealer have entered into an agreement under which the latter conducts promotional activities like co-branding, advertising campaigns or sale drives on behalf of the manufacturer.
Issuing a circular regarding treatment of secondary or post-sale discounts under Goods and Services Tax (GST), the CBIC said it has received representations seeking clarifications on the issue.
When dealers receive such post-sale discounts, they may engage in promotional activities to boost sales. However, these activities ultimately enhance the sale of goods that the dealers themselves own, thereby increasing their own revenue. In this context, the discount merely reduces the sale price of the goods and is not linked to any independent service rendered to the manufacturer.
“Therefore, it is clarified that post-sale discounts offered by manufacturers to dealers in such cases shall not be treated as consideration for a separate transaction of supply of services,” the CBIC said.
However, GST would be leviable in cases where a dealer undertakes specific sales promotional activities, such as advertising campaigns, co-branding, customisation services, special sales drives, exhibition arrangements, or customer support services, etc., only when such services are explicitly stated in the agreement with a clearly defined consideration payable for such a supply. (PTI)
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