Service Tax on Sales Incentives: Are They Taxable and Under Which Category?

Dear Seniors, kindly clarify the following service tax problem:

Service Tax on Incentives for XYZ & Co.

XYZ & Co. is an authorized dealer for two-wheeler parts, purchasing parts from its supplier and selling them to its dealers and customers. In addition to the regular profit on the sale of parts, XYZ & Co. also receives incentives on a monthly, quarterly, and yearly basis from its supplier, depending on the achievement of sales targets as decided and intimated by the supplier from time to time.

My question is whether such incentives received are taxable under the Service Tax Act and under which category.

Thank you, Sir.

Regards,
Amsarja
[Phone Number Removed For Privacy Reasons]

Incentives and Service Tax Implications

Incentives are part of sales promotion. Service Tax will apply to such payouts. If these incentives are outside the purview of Service Tax, most companies may pay a major percentage through incentives/bonuses in order to avoid Service Tax liability.

Regards,
Pon