The fast-moving consumer goods (FMCG) industry has petitioned the government to remove goods and services tax on the amount received by dealers and retailers as reimbursement against discounts and for promotional programmes to boost sales.
A circular issued by the government in end-June had said the amount received by a dealer from a supplier to sell a product at a special reduced price would be liable to GST, adding to the industry’s woes. The FMCG industry has now taken up the issue with the Central Board of Indirect Taxes and Customs. “Industry is apprehensive of the issue snowballing with tax authorities pressing notices if the matter is not clarified,” said a sector expert.
FMCG manufacturers, typically, offer discounts on the printed price to consumers to boost sales. These discounts, offered at the retail level by retailers or dealers, are borne by the company, which reimburses the difference to them.
You might also be interested to read: LTCG Tweak In The Works: No Levy On Equity Investment Held For Three Years
Dealers have to bear GST on the price inclusive of the discount, as per the current provisions. Moreover, they do not receive credit against tax paid on the discount portion. “It is increasingly difficult for distributors to push stocks to retailers because of lower offtake … Unless the earlier stocks get depleted, the distributor won’t buy fresh stock. So additional discounts are being given by companies to the distributor to do away with existing inventory,” said Mayank Shah, the category head ..
Source: Economic Times
