CBIC Aborted Initiation of GST Circular But Without Clarifications on Future GST Amendments

Following the circular issued by the indirect tax department, a wave of uncertainty was spread among the dealer group. Circular described the goods and service tax which is to be imposed on post-sale discounts by dealers. As per the circular issued by CBIC in June, the dealers were liable for 18% GST on the post-sale discounts they get from the supplier company or if the supplier asks them to pass on concessions to the end consumer. Latest GST Circular even depicted various situations where the dealer is liable for GST payment.

For instance, if the manufacturing unit sells its car to the dealer for Rs 10 Lakhs and on the car gives Rs. 50,000 discount. If the dealer is not obliged by the manufacturing company to pass on the benefit to the consumer then the dealer needs not to pay GST on Rs. 50,000 in another case if the company asks the dealer to pass on the benefit to the consumer then he is liable for GST payment on Rs. 50,000.

The scenario has bothered dealers and especially automobile dealers which are already dealing with the nightmare of depressing sales. 
According to the Confederation of Indian Industry (CII) the circular is deemed of disrupting the major principle of tax cost which holds the final consumer liable of GST on the supply of Goods and Services. As it says, “the supply of goods and services should suffer the tax only to the extent of consideration paid by the ultimate consumer”.

Opening up its views on the chaos in dealers group CBIC recently said “Numerous representations were received expressing apprehensions on the implementation of the said circular. In view of these apprehensions… the Board… hereby withdraws, ab initio, the circular.” The story doesn’t end here, experts have demanded a guaranteed word from the authority that further there won’t be any GST on post-sales discounts as field officers continue to harass dealers.

Issue With Input Tax Credit

The tax on the original purchase bill can be claimed as an input tax credit and can be adjusted using a credit note. The clause remains unaltered even after the withdrawal of the circular.
There is a clear need for CBIC to specifically talk on the circular and give clarification to the businesses and dealers regarding the circular.