In MAH/AAAR/DS-RM/04-/2023-24 -AAAR- AAAR (Maharashtra) rules Incentives from Intel Inside US to MEK Peripherals not trade discount, disqualifies supply as export of services
Members Dr. D.K. Srinivas (Central Tax) & Rajeev Kumar Mital (State Tax) [13-06-2023]

Read Order: In Re: M/s MEK Peripherals India Private Limited

Chahat Varma

New Delhi, June 23, 2023: The Maharashtra bench of the Appellate Authority for Advance Ruling (MAAAR) has upheld the order pronounced by the Maharashtra Authority for Advance Ruling (MAAR), ruling that the incentives received by the M/s MEK Peripherals India Private Limited (appellant) from Intel Inside US LLC (IIUL) was not a trade discount. The Authority further determined that the place of provision of service was in India as per Section 13(3)(a) of the Central Goods and Services Tax Act (CGST Act), thereby disqualifying the supply from being categorized as an export of services.

Briefly stated, the appellant, a reseller of Intel Products, entered into an agreement with IIUL as part of the Intel Authorized Components Supplier Program (lACSP). According to the agreement, the appellant would receive a non-binding Plan of Record Target (POR Target) which outlined the opportunity to earn incentives based on the performance towards quarterly goals on eligible Intel products.

Being aggrieved by the order passed by the MAAR, the present appeal was filed before the MAAAR.

The bench comprising Dr. D.K. Srinivas (Central Tax) and Rajeev Kumar Mital (State Tax) observed that in order for the incentives to qualify as a trade discount, several conditions need to be met. Firstly, there should be an agreement between the seller and the purchasing party, which was not present between the distributor and the appellant in this case. Secondly, the incentives should be directly linked to a specific invoice, whereas in this situation, they were based on the volume of sales undertaken by the authorized distributor. Lastly, there was no reversal of input tax credit by the Intel Authorized Distributors in relation to the goods supplied to the appellant.

The bench noted that the wording of Section 15(3)(b)(i) clearly stated that the discount should be established in terms of the agreement between the buyer and the supplier, and in this case, the only agreement on record was between IIUL and the appellant.

“MAAR has rightly observed that no sale transaction of goods has taken place between the appellant and hence incentives will not be covered under the provisions of Section 15(3) of CGST Act, 2017,” held the bench.

The bench further observed that in the present case, the marketing services provided by the appellant were related to goods that were physically made available by IIUL (through its distributors) to the appellant for the purpose of providing those services. According to Section 13(3)(a) of the CGST Act, the place of provision of service was determined by the location of the supplier of services, which in this case, was the appellant located in India. Therefore, the bench concluded that the supply of services in question did not qualify as an export of services.