The Kerala Authority for Advance Ruling (AAR) ruled that Distributors are liable to pay GST and also eligible to avail Input Tax Credit ( ITC ).
The applicant is an authorized distributor of Castrol India Ltd, Mumbai (Principal Company) for the supply of Castrol brand industrial and automotive lubricants. There is a written agreement between the Principal and the applicant about the distributorship. The Principal Company is controlling and managing the entire marketing activities of their products. The Principal Company’s software is mandatory to all and the company has its sole control over the billing software, the distributors or dealers can supply any goods of the company only through this software.
The Principal Company is issuing invoices at a price to its distributors and the distributors supplying the goods to the dealer’s issue invoice based on the various rate scheme pre-fixed by the Principal Company. While the distributor generates an invoice to dealers through the software designed by the Principal company, the invoice value of products will be displayed only with the value after deducting discount as per the pre-fixed rate scheme. The distributor is bound to supply the products to the respective dealers as per the value shown in the invoice. Such a discount 1 rebate will be subsequently reimbursed by the Principal.
The AAR bench is comprising of B.C. Krishnan and B. S. Thyagara jababu has given order on an application filed by M/s Santhosh Distributors.
In these circumstances the tribunal had given an advance ruling on the following:
1) On the tax liability of the applicant for the transactions mentioned herein and explained as above. The petitioner is paying the tax due as per the invoice value issued by the applicant and availing the input credit of pay GST shown in the inward invoice received by the applicant from the Principal Company or their stocklist. The applicant/distributor is eligible to avail ITC shown in the inward invoice received by him from the supplier of goods /principal company.
2) The discount provided by the Principal Company to their dealer, through the applicant as shown in Annexure D attracts any tax under the GST laws and this additional discount reimbursed by the principal company to the distributor is liable to be awed to the consideration payable by the customer to the distributor to arrive at the value of supply under Section 15 of the CGST / SGST Act at the hands of the distributor
3) The amount shown in the Commercial Credit note issued to the distributer by the Principal Company is not eligible to reduce his original tax liability and hence distributors will not be liable to reverse the ITC attributable to commercial credit notes received from suppliers.
4) ) GST is applicable on the amount received as reimbursement of the discount rebate from the principal company.
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