Friday, 8 September 2017

How regulate GST in case of Discount under BNPL scheme

How regulate GST in case of Discount under BNPL scheme

Sir/Madam,

Clarification sought by Supdt BPC Manipal and the solution for the same by DAP is forwarded herewith for guidance and necessary action.

Query by SPOs Manipal:

The Assistant General Manager, Syndicate Bank Cards Centre, No. 69, 1st Floor, 9th Main Road, Jayanagar, 3rd Block, Bengaluru – 560 011 Phone No. 9449877448 has sought a clarification regarding the calculation of GST in BNPL bill for the month of July, 2017. The bill was raised as below: 

1. No. of articles received in this month (Domestic 3988 + international 0)
3988
2. Total Speed Post (Domestic) Business for the month
2,41,220.00
3. Total discount eligible @ 10% (Domestic)
24,122.00
4. Total Business for international speed post articles (No discount)
0
5. Net Speed Post Charges
2,17,098.00
6. CGST @ 9%
19,539.00
7. SGST @ 9%
19,539.00
It is stated by the AGM that they have taken the opinion of Tax Consultants on GST. According to them the GST should have been calculated on the total speed post charges and discount should have been allowed only after the calculation of GST. The billing in that scenario will be as below.
1. No. of articles received in this month (Domestic 3988 + international 0)
3988
2.Total Speed Post (Domestic) Business for the month
2,41,220.00
3.Total Business for international speed post articles (No discount)
4.Speed Post Business Domestic + International
2,41,220.00
5.Total discount eligible @ 10% (on domestic articles only)
24,122.00
6.Net Speed Post Charges
2,17,098.00
7. CGST @ 9% of total business 2,41,220.00
21,710.00
8. SGST @ 9% of total business 2,41,220.00
21,710.00
There will be a huge difference is GST component. They put forth the argument that the MRP / basic price for speed post to be considered while calculating the tax and not the price after discount. 

As this aspect will make a huge difference in GST to be paid and later on if it is objected by GST authorities then it will invite a huge amount of penalty it is requested to kindly clarify the position at the earliest and oblige, please.

Solution:

From the reading of above it is clear that the DOP (Supplier of service) has entered into an agreement with Syndicate Bank (Recipient of service) under Business Rules of DOP BNPL scheme with such terms and conditions including offer of discount based on the quantum of business provided by Syndicate Bank at various slabs. According to Section 15(2) of CGST Act, 2017 value of supply shall not include any discount which is given after the supply has been effected, provided such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to the relevant invoices & ITC as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. Inasmuch as the calculations have been made by SPOs MANIPAL is within the ambit of above rules, the action taken by SPOs while charging GST after discount is in order. The Syndicate Bank may be appraised accordingly.

With Regards
Business Development Section
For Postmaster General
South Karnataka Region
Bengaluru-560001

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