Discount given to passengers by cab aggregator does not qualify as consideration, thus no GST: Guj. AAR

Case Details: Authority for Advance Rulings, Gujarat Gensol Ventures (P.) Ltd. In re - [2021] 133 taxmann.com 76 (AAR - GUJARAT)

Judiciary and Counsel Details

• • Sanjay Saxena and Arun Richard, Member
  • Devam Sheth, CA for the Appellant.

Facts of the Case

The applicant intended to own, develop an electronic/digital platform for booking of cabs. The drivers would list their electric motor vehicles on the proposed electronic platform/App for booking by the customers for the passenger transportation services. It filed an application for advance ruling to determine the value of supply for passenger transportation service on which Goods and Service Tax (GST) to be charged.

AAR Held

The Authority for Advance Ruling observed that GST is to be discharged on the transaction value as per section 15(1) of the CGST Act which is the price actually paid or payable for the supply of goods or services or both where the supplier and the recipient of the supply are not related, and the price is the sole consideration for the supply. However, GST is not applicable on the value of discount, which is recorded in and depicted on the invoice, provided by the supplier at the time of supply.

In the present case, the applicant would collect the consideration (after discount) from the customer and would remit total consideration to drivers. The drivers would not bear the expense of discount offered since it would be offered by the applicant and the applicant would remit the entire value of supply without reducing the discount amount to drivers. Thus, the marketing expenses in form of discount given to customers but paid by the applicant to drivers cannot be said to be consideration for or towards any service by drivers as no reciprocal activity would be performed by drivers in order to receive such compensation. Therefore, it was held that GST would be levied only on the consideration received from the customers net of discount by the applicant.

List of Cases Referred to

• • CCE v. ACER India Ltd. 2004 taxmann.com 409 (SC) (para 5)
  • Bansal Wire Industries Ltd. v. State of U.P. 2011 (269) ELT 145 (SC) (para 5)
  • Bai Mamubai Trust v. Suchitra [2019] 109 taxmann.com 200 (Bom.) (para 5)
  • Ruchi Soya Industries Ltd. v. Cmmr. of Cus. Central GST and C. Ex. [2021] 129 taxmann.com 368 (New Delhi – CESTAT) (para 5).