In re Karthik & Co. (GST AAAR Tamilnadu)
The appeal before the GST Appellate Authority for Advance Ruling Tamil Nadu arose from an Advance Ruling issued by the Authority for Advance Ruling (AAR), Tamil Nadu, concerning the GST treatment of non-monetary benefits received by a registered dealer engaged in wholesale and retail sale of paints. The appellant operates on a principal-to-principal basis with manufacturers and receives both monetary discounts and non-monetary incentives such as gifts, travel packages, and entertainment tickets under dealer schemes. These non-monetary benefits are subject to tax deduction at source (TDS) under Section 194R.
The appellant had originally approached the AAR seeking clarification on whether tax invoices raised for such non-monetary benefits are valid under GST law, whether the value subjected to TDS should be treated as “supply,” and if so, under which provision of the GST law such treatment arises. The AAR, in its ruling, held that the benefits received constituted “consideration” for supply of support services and were therefore taxable under Central Goods and Services Tax Act, 2017, specifically under Section 7 relating to “supply.”
Aggrieved by this ruling, the appellant filed an appeal, contending that the AAR failed to consider relevant clarifications issued through Circular No. 251/08/2025-GST Dated: 12th September, 2025, which addressed post-sale discounts in principal-to-principal transactions. The appellant further argued that the non-monetary benefits received were not in the course or furtherance of business and that there was no agreement governing such benefits at the time of the original application.
