The Authority for Advance Ruling, Tamil Nadu, confirmed that non-monetary benefits like gifts, compliments, and foreign or domestic tour packages received by a dealer from its principal manufacturer include supply of service under section 7 of the Central Goods and Services Tax Act, 2017 (CGST Act), and are thus accountable to Goods and Services Tax (GST).
The petitioner, M/s Karthick & Co., a registered paint dealer based in Tiruppur, operated both wholesale and retail outlets under a franchisee arrangement with paint manufacturers. The firm obtained non-cash incentives from its principals in the form of gifts and sponsored travel packages for itself and for painters who purchased large quantities of paint products.
Under Section 194R of the Income Tax Act, 1961, manufacturers had deducted TDS on these benefits. The applicant asked for a ruling on whether these non-monetary requirements amounted to a taxable supply under GST and whether the tax invoice it issued was valid.
For the applicant, P. Rajavel appeared and cited that the manufacturers claim that the said supply would neither come under the supply of goods nor services, while repeating the submissions in their application.
The authority during the proceedings said that the applicant took part in the promotional services and obtained sales targets that provided an advantage to the manufacturers; the non-monetary incentives were furnished in recognition of these services and thus represented consideration in kind.
Also Read: GST Not Applicable on Balance Freight Amounts Deposited by Shippers into Escrow Accounts
The bench specified u/s 7(1)(a) of the CGST Act, which mentions that the supply comprises all forms of provision of goods or services for a consideration by one person to another in the course or furtherance of business. Therefore, the Authority concluded that the receipt of such perquisites fell within the scope of “supply.”
The Bench, C. Thiyagarajan (IRS), Member (CGST), and B. Suseel Kumar (MBA), Member (SGST), stated that once the manufacturer had deducted TDS (Tax Deducted at Source) u/s 194R of the Act, the benefit was recognised as having monetary value. Thus, the applicant was right in ministering those perquisites as taxable and issuing related tax invoices levying CGST and SGST.
The AAR, in conclusion, held that the non-monetary incentives, though received in kind, show a taxable supply of service by the dealer to the manufacturer, and that the applicant should file GST on such value and its tax invoice towards it is valid under the GST law.
| Applicant Name | Karthik and Cо. |
| Advance Ruling No. | 46/ARA/2025 |
| GSTIN of the applicant | 33AAGFK0960K1ZD |
| Tamil Nadu GST AAR | Read Order |
