The Kerala bench of the Authority for Advance Rulings (AAR) has held that GST is payable on the fair trade premium as it forms part of the consideration for the goods supplied.
The applicant, Fair Trade Alliance Kerala, an association of farmers, approached the AAR seeking to determine the tax liability towards the fair trade premium under the GST regime.
A bench comprising Mr. Abraham Renn, Addl Commissioner (State Tax) and Ms. Sree Parvathy S L, Joint Commissioner (Central Tax) observed that as per Section 15(1) of the CGST Act, the value of a supply of goods or services or both shall be the trans-action value, which is explained as the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
“As per the applicant, the amount at which the buyer/exporter is purchasing is also above the market value. The buyer/exporter is further exporting the products by raising an invoice to the buyer abroad for a price that is inclusive of the Fair Trade Premium at the percentage prescribed for each product,” the bench observed.
While concluding, the bench held that that the fair trade premium received by the applicant is nothing but part of the price that is actually paid/received in response to the supply of the goods made by the applicant and invariably constitutes an additional consideration received in respect of the supply of goods and is to be added to the taxable value of the respective goods supplied and liable to GST at the same rate as applicable to the goods supplied.
“On a combined reading of the above provisions, it is clear that any payment made or to be made whether in money or otherwise in respect of or in response of inducement of supply of goods or services or both forms part of the consideration and should form part of the value of taxable supply. The definition of the term consideration is inclusive which not only includes the payment received by the supplier in relation to the supply from the recipient but also from any other person. The Fair Trade Premium is calculated as a percentage of the volume of produce sold,” the bench added.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
