HC Set Aside Order Demanding Tax On Post-Supply Volume Discount Being Not Includible in Transaction Value

Case Details: Supreme Paradise v. Assistant Commissioner - [2024] 159 taxmann.com 143 (Madras)

Judiciary and Counsel Details

• • C. Saravanan, J.
  • S. Sathyanarayanan & Ms K.M.C. Arunmokan, for the Petitioner.
  • Ms Amirtha Poonkodi Dinakaran, Government Adv. for the Respondent.

Facts of the Case

The petitioner was engaged in the retail sale of mobile phones. The GST Authorities had issued a notice to the petitioner demanding a tax on the discount o?ered by the supplier. The authorities argued that the discount could be allowed only in cases speci?ed in Section 15(3)(a) and (b) of the CGST Act, 2017.

The petitioner challenged the order on the ground that the transactional value should be the value on which GST was levied and paid on the entire invoice amount, which included volume discount. The petitioner further argued that the discount was not deducted for GST levy purposes and that the invoice value (without deduction of the volume discount) including GST was paid to the vendor supplier. Hence, the petitioner did not need to pay further tax on the volume discount amount.

High Court Held

The Honorable High Court noted that a further sale or supply of goods or services by the recipient of such goods or services at a discounted price cannot form part of “transaction value” of such recipient/seller, unless such discount was on account of subsidy for such supply given by a 3rd party and was disguised as a discount. A discount linked to subsidy alone can form part of “transaction value”.

The court also noted that the discount o?ered to the petitioner and the discounted price at which the petitioner e?ected further sale to its customers were two independent transactions and there was no scope for intermingling them for demanding tax from the petitioner. The Court, therefore, quashed the impugned orders and remitted the case back to the respondent authority to pass order on merits.