The circular is issued to clear doubts among businesses and to ensure that tax rules are applied to discounts uniformly across the country. (iStock)
The circular is issued to clear doubts among businesses and to ensure that tax rules are applied to discounts uniformly across the country. (iStock)

Some discounts dealers get from producers are taxable: CBIC

  • The circular is issued to clear doubts among businesses and to ensure that tax rules are applied to discounts uniformly across the country
  • It also said that where the discount is linked to specific activities to be done by the dealer, like issuing advertisements or holding exhibitions

NEW DELHI : The government on Friday clarified that certain discounts that retailers get from their suppliers such as the ones that have to be passed on to the final consumers are taxable in the hands of the dealers.

The Central Board of Indirect Taxes and Customs (CBIC) said in a circular that discounts that dealers get from suppliers which are to be passed on to final consumers help in boosting sales and therefore amount to a taxable consideration flowing from the supplier to the dealer. Such discounts are to be added to the value of supply of the dealer to the consumer for payment of GST.

The circular is issued to clear doubts among businesses and to ensure that tax rules are applied to discounts uniformly across the country. It also said that where the discount is linked to specific activities to be done by the dealer, like issuing advertisements or holding exhibitions, it would qualify as a supply by the dealer to the supplier and the dealer would have to pay GST on such discounts.

Abhishek Jain, tax partner at EY, said the clarifications on taxability of discounts linked with performance incentives and applicability of GST on discounts offered by manufacturers to dealers with the condition of these being passed on, would obligate businesses to take a fresh look at their current tax positions.

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