Summary: The Central Government has issued Notification No. 03/2026–Central Tax dated 26 October 2026, appointing 1 November 2026 as the effective date for Section 153 of the Finance Act, 2026. This provision substitutes Section 15(3)(b) of the CGST Act, 2017, changing the conditions for excluding post-supply discounts from the taxable value of goods or services. Previously, suppliers were required to establish discounts under agreements entered into before or at the time of supply, link the discounts to relevant invoices and ensure reversal of attributable input tax credit by recipients. The amendment removes the prior-agreement and specific invoice-linkage requirements, providing greater flexibility for businesses offering year-end discounts, turnover incentives and other commercial benefits. However, the amended provision continues to impose important compliance conditions. Suppliers must issue GST credit notes in accordance with Section 34, and recipients must reverse the input tax credit attributable to the discounts. The related amendment to Section 34, introduced through Section 154 of the Finance Act, 2026, expressly recognises post-supply discounts as a ground for issuing credit notes. These changes are expected to simplify discount arrangements for manufacturers, traders, distributors and other businesses while maintaining safeguards against inappropriate reductions in GST liability. Taxpayers should review their discount policies, credit-note procedures and ITC reversal arrangements to ensure compliance with the amended provisions from the notified commencement date.
GST Notification No. 03/2026–Central Tax: Major GST Changes Effective from 1st November 2026 – Section 153 (Post-Supply Discounts)
Introduction
The Central Government, through Notification No. 03/2026–Central Tax dated 26th October 2026, has brought Section 153 of the Finance Act, 2026 into effect from 1st November 2026. This amendment brings an important change to Section 15(3)(b) of the CGST Act, 2017, which deals with the deduction of post-supply discounts from the taxable value of goods or services. The amendment is expected to provide relief to manufacturers, traders, distributors and other businesses granting discounts after the supply of goods or services.
1. What Was the Earlier Provision?
Under the earlier provisions of Section 15(3)(b) of the CGST Act, businesses could reduce the taxable value by claiming post-supply discounts only when certain conditions were satisfied.
Conditions Under the Earlier Provision
The following conditions were required:
1. The discount must be established in terms of an agreement entered into at or before the time of supply.
2. The discount must be specifically linked to relevant invoices.
3. The recipient must reverse the ITC attributable to the discount.
Because of these conditions, businesses faced difficulties while providing year-end discounts, turnover-based incentives and other commercial benefits.
2. What Is the New Amendment?
Section 153 of the Finance Act, 2026 amends Section 15(3)(b) of the CGST Act.
Requirements Removed from 1 November 2026
With effect from 1st November 2026, the requirements relating to the following have been removed:
- An agreement entered into before or at the time of supply.
- Linking the discount to specific invoices.
This gives businesses greater flexibility in providing discounts after the supply.
Conditions That Continue to Apply
However, the following conditions must still be satisfied:
- The supplier must issue a GST credit note.
- The recipient must reverse the ITC attributable to the discount.
- The applicable requirements of Section 34 must be followed.
Conclusion
Section 153 of the Finance Act, 2026 introduces an important relaxation in the treatment of post-supply discounts under GST.
The removal of the prior agreement and invoice-wise linkage requirements provides businesses with greater flexibility while granting commercial discounts.
However, businesses must ensure that the recipient reverses the corresponding ITC and that the supplier follows the applicable credit note requirements under Section 34 of the CGST Act.
Effective Date: 1st November 2026.
Legal Reference: Section 153 of the Finance Act, 2026 read with Section 15(3)(b) of the CGST Act, 2017.
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