No Service Tax On Target-Based Discounts From Maruti Suzuki To Dealers: CESTAT

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that no service tax on target-based discounts from Maruti Suzuki to dealers. Dr. Rachna Gupta (Judicial) and P.V. Subba Rao (Technical Member) stated that the incentives/ discounts received by the dealers of car manufacturer were not taxable under Auxiliary Service (BAS), as they were the part of a business transaction on a principle-to-principle basis. M/s. Vipul Motors Pvt Ltd. being an authorized dealer of M/s Maruti Suzuki India Ltd. ('MSIL'), is a service provider of maintenance and repairing of Light Motor Vehicles / Passenger Cars etc. An investigation was initiated regarding non-payment of Service Tax by authorized dealers of MSIL in relation to certain payments received as incentives / discounts reimbursements/trade discount, opining them to be in nature of consideration for Service. The assessee submitted that Service Tax is not leviable on the said amount received by the assessee's company as the same are in the form of incentives, which are linked with Wholesale/ Retail targets, and no service whatsoever was rendered by M/s VMPL to MSIL to earn the incentives. A show cause notice was served to the assessee proposing the demand of service tax on consideration received by them as incentives/discounts reimbursement from MSIL for providing of taxable services in terms of provisions of Section 68 of the Finance Act, 1994 read with Section 66D of the Act, ibid and provisions of Rule 6 of the Service Tax Rules, 1994. The Tribunal agreed with the assessee that the incentives received by the M/s VMPL did not relate to provision of any services because the M/s VMPL and MSIL are acting on Principal to Principal basis. Otherwise also these incentives are received by the M/s. VMPL as an award for meeting up the business targets set by MSIL. Thus, they are in the nature of target incentives/discount and are not connected to any type of provision of service to MSIL. Further, in the absence of element of “Service”, the charging section 66B doesn't apply and therefore such incentives are not chargeable to service tax, agreed the Tribunal. The bench held that the amount of incentives / discounts received by the assessee during the period of dispute have wrongly been held as consideration for rendering a service called BAS. Service tax demand has been wrongly confirmed by the Adjudicating Authority below. In view of the above, the Tribunal allowed the appeal. Case Title: M/s. Vipul Motors Private Limited v. Principal Commissioner of CGST & Central Excise, Jaipur - I Case Number: Service Tax Appeal No. 52943 of 2019 Counsel for Appellant/ Assessee: Neeraj Gupta Counsel for Respondent/ Department: Shashank Yadav Click Here To Read/Download The Order

No Service Tax On Target-Based Discounts From Maruti Suzuki To Dealers: CESTAT

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No Service Tax On Target-Based Discounts From Maruti Suzuki To Dealers: CESTAT

Mehak Dhiman

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INR 1099+GST

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