The Maharashtra bench of the GST-Appellate Authority for Advance Rulings (AAAR) has held that the incentive earned by the reseller, from a US entity, is not in the nature of a ‘trade discount’. In other words, the reseller will have to bear a goods and services tax (GST) of 18% on such an incentive, which was based on attaining quarterly targets on eligible Intel products.

The US entity was selling goods through its distributors. The appellant — MEK Peripherals, a private company — purchased goods from these distributors for onward sale to retailers. It submitted to the AAAR that there is no bar under GST laws or under common law that the trade discount should flow from the immediate vendor only, as it can also flow directly from the original manufacturer (US entity).

The AAAR bench upheld the earlier ruling of the authority for advance rulings and on various grounds it held the incentive was not a trade discount. The appellant also submitted that if it was not treated as a trade discount but a supply of services, it should qualify as an export of services. This was not upheld, as in view of the AAAR the place of supply — of the marketing services as a reseller — was in India.

Source: The Times of India 
https://timesofindia.indiatimes.com/business/india-business/target-based-incentives-to-attract-18-gst/articleshow/101117766.cms