Vardhman Electronics Vs Additional Commissioner, Central Tax
Date: May 12, 2025
Subject Matter
Discounts given by manufacturers to retailers generally cannot be considered consideration for services
Summary
The Delhi High Court has temporarily halted a ₹9.85 crore GST demand and penalties imposed on Vardhman Electronics. The retailer, which sells household appliances and electronic goods, received discounts from manufacturers. However, the GST Department viewed these discounts as payment for a service rendered by the retailer to promote the manufacturer's goods, thus making them liable for GST.
Vardhman Electronics challenged this interpretation, arguing that the discounts are not taxable. The High Court, hearing the case in a hybrid mode, prima facie agreed with the petitioner, stating that discounts given by manufacturers to retailers generally cannot be considered consideration for services.
The court has stayed the impugned order issued by the Additional Commissioner, CGST Delhi West, which confirmed the demand. The case is now set to be heard before the Joint Registrar on July 18, 2025, and before the Court on September 25, 2025.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This hearing has been done through hybrid mode.
2. The present petition has been filed by the Petitioner – Vardhman Electronics under Article 226 of the Constitution of India inter alia assailing the Show Cause Notice dated 26th September, 2023 issued by the Additional Commissioner, CGST Delhi, Audit-II (hereinafter, the ‘Additional Commissioner’) as also the consequent order dated dated 30th January, 2025 bearing No. 199/CGST WEST/ GST/ SKG/ ADC/202425 passed by Additional Commissioner, CGST Delhi West.
3. Vide the impugned order, the Additional Commissioner has inter alia confirmed the demand of short payment of tax amounting to Rs. 9,85,22,360/-and additional penalties.
4. The allegation in this petition is that the Petitioner is a retailer selling various household appliances and other electronic goods. The Petitioner is given discounts by various manufacturers. However, the Revenue Department seeks to construe such discounts as an income on which Goods and Services Tax (‘GST’) is payable.
5. The manner in which the Revenue Department interprets it, is to say that the giving of a discount is in fact a service being rendered by the retailer to promote the goods of the manufacturer and hence the same is liable for GST.
6. Issue notice. Notice is accepted by Ms. Monica Benjamin, ld. SSC appearing for the Respondents.
7. Considering the nature of the matter, this Court is of the opinion that discounts given by manufacturers to retailers, prima facie, cannot be considered as a consideration for services rendered by the retailer. Accordingly, the impugned order shall remain stayed.
8. List before the Joint Registrar on 18th July, 2025.
9. List before the Court on 25th September, 2025.