Incentives in the form of gold, other assets may attract GST

livemint.com:

GST) following a recent ruling by the Karnataka Authority for Advance Ruling (AAR). In a case involving Orient Cement, the AAR determined that such incentives provided by companies to dealers should be classified as a “supply" under GST rules and be subject to tax. Tax experts said the judgment contradicts previous court verdicts on similar cases.

That apart, since such incentive schemes are very common across companies, a clarification from GST Council would allay industry concerns, they added. The case concerns two special dealer schemes offered by Orient Cement, in which dealers get rewards in gold coins based on their cement purchases during a specific period. The central question in this case was whether distribution of gold coins should be considered ‘permanent transfer’ of assets.

According to GST rules, any permanent transfer or disposal of business assets, where input tax credit is claimed, will be considered as supply of goods. Orient Cement argued its scheme should not be categorized as a supply of goods because the gold coin is not an asset of the firm, but is treated as expenses, according to accounting standards and were not capitalized in the company’s books. Furthermore, it asserted that the company did not receive any consideration for these gold coins, but they were offered as a reward when a dealer achieved a specific target.