Question 37:
A motor vehicle dealer received credit notes of incentives from manufacturing co.. in such credit notes gst has not been charged. what is the consequence of these credit notes under gst.
How to treat these credit notes in accounting terms.
Answer
The credit note and debit note u/s 34 should be related to
invoice but in this case the credit note is issued for achievement of sale
target. The achievement of sale target is a service provided by the dealer to
the manufacturer. The same is classified under category of service by virtue of
clause 5(e) of Schedule II of the CGST Act. The same is reproduced:
5. Supply of services
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(e) agreeing to the obligation to refrain from an act, or to tolerate an act or
a situation, or to do an act;
The credit note issued by the manufacturer is only for accounting purpose. For
GST, the dealer should raise invoice as service provider and charge tax @ 18%.
(reply dt. 05/01/2018)