• MEK Peripherals India Pvt Ltd. (‘the Applicant’) is a reseller of products. The distributors import products from Intel Inside US LLC (‘IIUL’) and sells to the Applicant for further resale to retailers in India
• The Applicant and distributors have entered into an agreement with IIUL under Intel Authorized Components Supplier Program (‘the IACSP’) under which the Applicant receive a non-binding Plan of Record Target (‘the POR Target’)
• Under the POR Target, the  Applicant will earn certain incentives directly from IIUL as a percentage of performance linked quarterly sales target on eligible Intel products
• The Applicant contended that the said incentives are in the nature of a trade discount under Section 15(3) of the Central Goods and Services Tax Act, 2017 (‘CGST’) and thereby not subject to GST
• The Applicant also contented that even if it is held that the incentives does not amount to discount, the same should be considered as a consideration for supply of services (since there is no supply of goods involved between the Applicant and IIUCL), which should qualify as export of service and thereby not leviable to GST

1. Whether the incentive received from IIUL under the IACSP can be considered as a trade discount?
2. If it is not considered as a Trade Discount, whether it is consideration for any supply?
3. If it is considered as supply of services, whether it will qualify as export of service?

1.   Incentives are not in the nature of a ‘trade discount’

Incentives received by the Applicant from IIUL cannot be considered as a trade discount and accordingly cannot be covered under the provisions of Section 15(3) of the CGST Act on account of the following reasons:

•  There is no supply of goods or services or both from IIUL to the Applicant
• The supply of goods in respect of which the incentives are purported to be given are undertaken by the distributors and not by IIUL
• The Applicant receive incentive directly from IIUL for increasing the business of IIUL and does not receive any incentive from the distributors.

2.   Incentives qualify as a ‘consideration’ for supply of services but does not qualify as ‘export of services’

• The Applicant is rendering marketing services to IIUL against which a consideration is received in the form of incentives
• Marketing services provided by the Applicant are in respect of goods which are made physically available by the recipient of services (i.e. IIUL, through its distributors) to the supplier of marketing services (i.e. the Applicant), in order to provide the services
• As per Section 13(3)(a) of the Integrated Goods and Services Tax Act, 2017, the place of provision of services in such cases is the location of the supplier of services i.e., the Applicant, which is in India (since the services are performed in India)
• Thus, the said supply of services does not qualify as export of services under the GST Law and hence leviable to GST.