Service Tax Not Leviable On Incentives For Achieving Sales Target: CESTAT

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the service tax is not leviable on incentives for achieving sales targets.

The two-member bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has relied on the decision of the CESTAT in the case of M/s DD Motors vs. Commissioner of Central Excise, Uttar Pradesh, and observed that the amount received for achieving certain sales targets is not taxable under the category of business auxiliary service as the same is in the form of a trade discount received by the appellant from the supplier of vehicles.

The appellant/assessee has challenged the order dated July 20, 2017, passed by the Commissioner confirming the demand for service tax with interest and penalty assailed by M/s Audi Motors.

The issue raised was whether the incentives for achieving the sales target can be considered commission for providing "business auxiliary services and, therefore, subjected to the levy of service tax.

The Tribunal, while setting aside the order dated July 20, 2017, passed by the Commissioner, noted that the appellants were receiving a certain monetary incentive when they achieved a predetermined sales target. The target incentives, which are more in the nature of trade discounts, cannot be subjected to service tax under the category of business auxiliary services.

Case Title: M/s Audi Motors Pvt. Ltd. Versus Commissioner CGST, Jodhpur

Case No.: Service Tax Appeal No. 51624 of 2017

Date: 21/04/2023

Counsel For Appellant: Vivek Thokalia

Counsel For Respondent: Radhe Tallo

Click Here To Read The Order