Tamil Nadu AAR Rules, Non-Monetary Benefits From Manufacturer “Promotional” In Nature, Taxable Under GST
Sangeetha Prathap
The Tamil Nadu Authority for Advance Ruling (AAR), comprising C. Thiyagarajan (CGST Member) and B. Suseel Kumar (SGST Member), has held that non-monetary benefits received by a dealer from a manufacturer, such as gifts, perquisites and tour packages, constitute consideration for “support services” and are therefore taxable under the Goods and Services Tax (GST) framework. The ruling was issued on 17.11.2025 in respect of an application filed by a wholesale and retail paint dealer.
The applicant buys and sells paint products and receives promotional benefits from manufacturers, which range from free gifts to foreign tour packages offered to the dealer as well as to painter-customers purchasing products. These benefits have been subjected to 10% tax deduction at source under Section 194R of the Income Tax Act, and the applicant had been issuing tax invoices treating such benefits as taxable supply. The applicant submitted before the AAR that since these benefits are considered income under the Income Tax Act and appear in Form 26AS, GST should also recognise them as taxable consideration.
The AAR examined the scheme of the CGST Act and noted that the applicant promotes the manufacturer’s business by augmenting sales, thereby providing a commercial advantage to the manufacturer. In return, the applicant receives perquisites in kind. According to the Authority, this exchange establishes the quid pro quo contemplated under GST law for a taxable “supply”. It therefore concluded that such non-monetary benefits constitute “consideration” within the meaning of Section 2(31) of the CGST Act, and the activity amounts to supply of services under Section 7.
The Authority declined to accept the applicant’s contention that promotional gifts and tour benefits fall outside the scope of GST because there is no monetary flow. It held that the nature of consideration is immaterial; if benefits are received “in response to or for the inducement of” a business advantage, they fall squarely within the statutory definition of consideration. It further held that no exemption under Notification 12/2017 applies to such transactions and, therefore, GST is chargeable.
With respect to valuation, the AAR found that since the consideration is not wholly in money, Rule 27 of the CGST Rules applies. The value of supply must be determined by matching the value of benefits as reflected in the TDS certificates issued under Section 194R, which also represent taxable income in the applicant’s hands. The ruling states that GST at 18% is applicable on such value, treating the applicant as the supplier and the manufacturer as the recipient of services
The Authority also clarified that as the applicant does not receive any monetary payment apart from the perquisite value, an invoice may be issued on a tax-inclusive basis in terms of Rule 35 of the CGST Rules. It emphasized that since the manufacturer deducts TDS and the benefit amount appears in the Form 26AS, the applicant must raise invoices corresponding to that value and charge GST appropriately
Concluding the matter, the Tamil Nadu AAR ruled that non-monetary benefits received by the applicant amount to consideration for support services rendered to the manufacturer. It held that the applicant’s GST invoices on the perquisite value are valid, and the transactions are taxable supplies for the purposes of the GST Act. Accordingly, the application was disposed of with specific findings that promotional benefits are taxable under GST, and the applicable rate is 18%.
Applicant's Name: Karthik & Co.
