GST on Dealer Incentives: AAAR Remands Matter Back to AAR After Finding Dealer Furnished Different Facts During Appeal [Read Order]

The Tamil Nadu State Appellate Authority for Advance Ruling (AAAR) remanded the matter back to the Authority for Advance Ruling (AAR) after finding that the dealer had furnished completely different facts during appeal proceedings in a dispute relating to GST on dealer incentives and non-monetary benefits.

The appellant, Karthik & Co., is engaged in wholesale and retail trading of paints and hardware products. The appellant received various incentives and non-monetary benefits from paint manufacturers, including gifts, tour packages, entertainment tickets and other perquisites linked to achievement of sales targets under dealer schemes. The manufacturers also deducted TDS under Section 194R of the Income Tax Act on such benefits.

The appellant’s counsel argued that the transactions with manufacturers were on principal-to-principal basis and the incentives were only post-sale benefits under dealer promotion schemes. They argued that such benefits cannot be treated as consideration for supply of services under GST law.

The counsel also relied on Circular No. 251/08/2025-GST dated 12.09.2025 to submit that dealer incentives should not automatically be treated as taxable supply. Further, they argued that deduction of TDS under Section 194R of the Income Tax Act does not automatically create GST liability.

The original Tamil Nadu AAR had earlier held that the non-monetary incentives received by the dealer constituted consideration for support services supplied to manufacturers and therefore attracted GST.

The bench comprising Shamim Ahmed, Member (Central Tax) and S. Rajeev Babu, Member (State Tax) observed that the appellant had furnished materially different facts during appeal proceedings compared to the facts originally submitted before the AAR. The AAAR noted that before the original AAR, the appellant had stated that there was no prior agreement regarding incentives, whereas during appeal it claimed that specific dealer schemes and prior agreements existed for such benefits.

The AAAR observed that the facts presented during appeal were “completely different and divergent” from the original facts placed before the AAR. It held that since advance rulings are entirely based on the factual matrix presented by the applicant, the matter required fresh examination by the original authority.

The AAAR stated that where the factual foundation itself changes during appellate proceedings, the matter should be reconsidered afresh following principles of natural justice. Accordingly, the matter was remanded back to the Tamil Nadu AAR for fresh adjudication

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