Non-Monetary Benefits From Manufacturer “Promotional” In Nature, Taxable Under GST: Tamil Nadu AAR

The Tamil Nadu Bench of Authority for Advance Ruling (AAR), comprising C. Thiyagarajan (CGST Member) and B. Suseel Kumar (SGST Member), has held that non-monetary benefits such as gifts, perquisites, and tour packages received by a dealer from a manufacturer amount to consideration for “support services” and are exigible to Goods and Services Tax (GST). A wholesale and retail paint dealer, approached the AAR seeking clarity on the GST implications of non-monetary benefits provided by paint manufacturers. The benefits ranging from free gifts to foreign tour packages for both the distributor and its painter-customers were subjected to 10% TDS under Section 194R of the Income Tax Act, and the applicant had raised tax invoices treating these benefits as supply. The applicant submitted that because these benefits appear in Form 26AS due to TDS deduction, they are treated as income under the Income Tax Act. They argued that GST law should operate consistently, and therefore the same benefits should be recognised as taxable consideration. The AAR examined the facts and ruled that the non-monetary benefits represent “consideration” under Section 2(31) of the CGST Act. The Authority reasoned that the applicant provides a business advantage to manufacturers by augmenting sales, and the perquisites received in return complete the quid pro quo necessary for “supply” under Section 7. Since no exemption under Notification 12/2017 applies, the activity is taxable as a supply of support services. On valuation, the AAR held that as the consideration is not wholly in money, Rule 27 of the CGST Rules applies. The value of supply must therefore match the value of the benefits as reflected in the TDS certificates issued under Section 194R, which also constitutes taxable income for the applicant. GST at 18% is applicable. The Authority also observed that since the applicant receives no monetary payment apart from the perquisite value, invoices may be issued on a tax-inclusive basis in terms of Rule 35. Ruling that the non-monetary benefits are “consideration” for support services rendered to manufacturers, the AAR concluded that the applicant's GST invoices are valid and the transactions fall squarely within the scope of “supply” under Section 7 of the GST Act. Advance Ruling No.: 46/ARA/2025 Dated: 17.11.2025 (TAMIL NADU AAR) Click Here To Read/Download Order

Non-Monetary Benefits From Manufacturer “Promotional” In Nature, Taxable Under GST: Tamil Nadu AAR

Manu Sharma

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