Quantity Discount do not form part of the Turnover under KVAT Act: Kerala HC [Read Judgment]

Kerala High Court-Tax Exemption-taxscan

In a recent ruling, the Kerala High Court held that, under the Kerala Value Added Tax Act and the connected Circular, the quantity discount shall be deducted from turnover even if there is no evidence to show that the discount has been reached in the hands of the end customer.

In the instant case, the sole grievance for the petitioners was that the Assessing Officer has completed by including the quantity discount given to the dealers as part of the turnover. The petitioners urged that during the previous years, the assessing officer, based on the circular, had deleted the quantity discount from the turnover and therefore, the same may be allowed to the petitioners for the year under consideration also.

The Revenue, on the other hand, submitted that there is no evidence to show that the quantity discount given by the dealer has reached the hands of the end customers, free of cost.

Justice A.M Shaffique observed that Section 7 only indicates that the dealer who allows trade discount or incentive in terms of quantity in goods in relation to any sale effected by him. The quantity so allowed as trade discount or incentive shall be deemed to be a sale by the dealer.

“Statute does not say that the said trade discount shall form part of the turnover of the dealer. This aspect has been clarified by the Commissioner in the circular along with the illustration. The illustration substantially clarifies the issue and as pointed out by the learned counsel for the petitioner, when the assessing officer himself has subsequently accepted the illustration in the circular and in the case of the petitioner, orders were passed on 01/10/2016 in respect of the previous years, I do not think that any further consideration of the matter is required.”

Allowing the writ petition, the Court observed that “That there is no evidence to show that the end customer was given the benefit of trade discount, is not at all a matter, which the petitioner is concerned. As far as the petitioner is concerned, he had effected sale of goods by providing the quantity discount and the turnover is only with respect to the consideration received by the petitioner for the quantity which is actually sold and the discount given to the dealer in question.”

Read the full text of the Judgment below.