Dear All,

This is in furtherance to the below Tax Focus circulated in the appended e-mail pertaining to the Advance Ruling issued by the Authority for Advance Ruling, Kerala (“the AAR”) in the case of Santhosh Distributors (“the Distributor/the Applicant/ the Appellant”).

Aggrieved by the ruling passed by the AAR, the Applicant filed an appeal before the Appellate Authority of Advance Ruling, Kerala (“the AAAR”).

The AAAR upheld the AAR ruling basis the following key findings:

• Additional post sale discount reimbursed by the Principal Company to the Distributor was not known/quantified in the contractual agreement. Therefore, the same shall not be considered as ‘discount’ in terms of Section 15(3)(b)(i) of the CGST Act and shall not be reduced from the transaction value for the purpose of arriving at the value of supply.

• The Appellant had no control over the quantum of scheme discounts offered to the dealer/customer. The discounts offered were as per instructions of the Principal Company and were completely reimbursed by the Principal Company. Also, the additional discount by the Principal Company to the Appellant was a consideration for offering the reduced price to the dealer/customer in order to augment the sales.
• Accordingly, it was held that the discount over and above the invoice value was liable to be added to the consideration payable by the dealer/customer to the Appellant for the purpose of computing the value of supply as per provisions of Section 15 of the CGST Act.

*Appellate Advance Ruling Order No. AAR/10/2021 dated 01 March 2021 (The Appellate Authority for Advance Ruling, Kerala)