According to a person, the government has docked the GST (Goods and Services Tax) anti-evasion because they were asking automobile dealers for the retrospective tax on the discounts/benefits that have been taken from the manufacturers to promote the sales.
The above-quoted person said on the anonymity condition that as per the CBIC (Central Board of Indirect Tax Customs) above mentioned transactions are discounts and must not be considered under the service.
The person also said that Directorate General of GST Intelligence’s Mumbai Team sent 40 dealers show-cause notices. The company’s such as Maruti Suzuki India Ltd. and Hyundai Motor India Ltd.’s vehicles were included in it and were asked to pay INR 83 crores as tax which has been levied from 1st July 2012.
As per the GST intelligence team, discounts which were given to the dealers or distributors to promote due to which tax must be levied, the person said.
Also, the department wants to levy taxes on the car dealers on the basis of the assumptions that they are offering services to the car manufacturers
Sumit Lunker, indirect tax partner at PwC India told that if the seller is giving the discount then it should not come under the term of the service.
No word has been uttered by the Maruti Suzuki and Hyundai India on the notice they have been issued.
The person further added that the GST investigating agency asked for the tax from the distributors on the discounts after the sale which is not included in the original sale when dealership receives the vehicles but after the clear list it is later offered as an incentive.
As per the GST law, against just discounts, manufacturers must provide a credit note to the dealers and the tax must be paid on the entire amount which also includes the discount.
The person said that the GST investigating agency also demanded the payment of discounts from the dealers because they are promoting the brand due to which it will be considered as a service, not a discount. This demand has been raised since 2012.
But the government speaking against the GST intelligence members said that they misinterpreted the GST law and asking for the service tax retrospectively when the GST was not even rolled out is wrong, the person said.
Udit Gupta, the partner at law firm Udit Kishan & Associates, agreed to the fact and said “No tax demand can be raised under the CGST Act for a period prior to July 2017. Such demand is not legally tenable and will disrupt the trade. The taxman should avoid such proceedings”.
There are wide implications of this issue, as the common behaviour among the manufacturers of consumer goods is prevailing, as per the person. The official said that the industries must have the knowledge about the right legal position and also about the government’s stand to avoid the legal action.
In March 2019, the government said that the tax must not be paid by the consumer goods makers on the promotional offers which include ‘buy one get one free’’. This step was taken because the GST intelligence members demanded tax from the companies on the promotional offers which were free.
Mam, could you please explain the above with a few examples