Retrospective and incremental slabs, what the last few lakh of purchases are really worth, and your margin after schemes, rebates and credit notes.
By Manoj Sahukar· October 2026 · 11 min read
How numbers are rounded on these pages. Calculations are done at full precision and rounded only at the end, half up. Rupee amounts are rounded to the nearest rupee unless shown with paise, in which case to the nearest paisa. Percentages are shown to two decimal places, days to one decimal place, and payback periods in years to two decimal places. Interest for a number of days uses a 365-day year (simple interest). Break-even job counts and units needed to cover a cost are rounded up to the next whole number. All examples and quiz questions are Hypothetical: they show the method, not real prices or rates.
Target slabs and incentive payouts
Most brands pay dealers an incentive (often called a scheme or target bonus) when purchases or sales reach a percentage of a target. The bands are called slabs. In a retrospective (retroactive) slab, the higher rate applies to all your volume once you cross it, so the last few lakh of purchases can be worth a lot. In an incremental slab, the higher rate applies only to the volume above the slab line.
Chasing a slab is worth it only if the extra incentive is more than what the extra stock costs you: interest on the money tied up, any discount you give to clear it, and the risk that it does not sell. Scheme terms differ by brand, so always read the actual scheme letter.
The standard formulas
Achievement % = Actual purchases (or sales)Target × 100
PayoutRetrospective slab: Payout = Slab rate × Total eligible volumeIncremental slab: Payout = Σ (Slab rate × Volume within that slab)
Is it worth chasing?Net value of chasing a slab = Extra payout − Interest on extra stock − Clearance discount − Other extra costs
Terms used
Target
The purchase or sales value (or units) the brand sets for a period, such as a quarter.
Slab
A band of target achievement (for example 100% to 109%) that earns a set incentive rate.
Retrospective slab
Once you reach the slab, its rate is paid on your whole volume for the period.
Incremental slab
The rate is paid only on the volume inside each band.
Worked examples
HypotheticalBasicWhere you stand on the slab
Quarterly purchase target ₹20,00,000. Slabs (retrospective, on total purchases): below 90%: nil; 90% to below 100%: 1%; 100% to below 110%: 2%; 110% and above: 3%. The dealer has bought ₹19,00,000.
HypotheticalIntermediateIs the next ₹1 lakh worth buying?
Same dealer. Buying ₹1,00,000 more takes him to 100%.
New payout = 2% × ₹20,00,000 = ₹40,000; extra payout = ₹40,000 − ₹19,000 = ₹21,000
That is 21.00% of the extra ₹1,00,000, because the higher rate applies to everything.
If the extra stock takes 60 days to sell and his money costs 12% a year: interest = ₹1,00,000 × 12% × 60 ÷ 365 = ₹1,972.60
Net gain = ₹19,027.40. Worth it, as long as the stock really sells at normal margin.
HypotheticalAdvancedChasing the top slab
From 100% (₹20,00,000), the dealer considers buying another ₹2,00,000 to reach 110% and the 3% slab.
Payout at 110% = 3% × ₹22,00,000 = ₹66,000; extra over the 2% slab = ₹26,000 (13.00% of the extra purchases)
This stock is slower: 120 days at 12% = ₹7,890.41
To clear it he expects to give an extra 3% discount on ₹2,00,000 = ₹6,000
Net gain = ₹26,000 − ₹7,890.41 − ₹6,000 = ₹12,109.59
Still positive, but less than half the headline payout. If the stock might not sell at all, it is not worth it.
Effective margin after schemes, credit notes and rebates
The margin on the invoice is not the whole story for a dealer. Brands also pay per-unit schemes, quarterly or annual rebates, and support for consumer offers, usually by issuing a credit note. Your effective margin is what you keep after all of these, as a share of your selling price or sales.
Credit notes often arrive weeks or months after the sale, so money you have earned is still with the brand; that delay has an interest cost. How schemes and credit notes are treated for GST and income tax depends on the exact terms, so check with your chartered accountant.
The standard formulas
Per unitNet cost per unit = Invoice cost − Scheme per unit − Rebate per unit
HypotheticalAdvancedAll credits for the quarter, and the cost of waiting
Same quarter. Credit notes due: schemes ₹30,000, rebate ₹50,000, and ₹25,000 reimbursing consumer offers the dealer funded (already deducted from sales). They arrive 90 days after quarter end; his money costs 12% a year.
Cost of waiting 90 days = ₹1,05,000 × 12% × 90 ÷ 365 = ₹3,106.85
Track credit notes due like customer dues: they are money owed to you.
Quiz: targets, schemes and effective margin
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