Post-Sale Discounts and ITC Reversal: CBIC Removes Requirement of CA Certificates from Recipients
The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 253/10/2025-GST dated 1st October 2025, withdrawing its earlier Circular No. 212/6/2024-GST dated 26th June 2024. The earlier circular had prescribed a procedure for suppliers to prove compliance with Section 15(3)(b)(ii) of the CGST Act, 2017, particularly with respect to reversal of Input Tax Credit (ITC) by the recipients. This move is significant because it reduces compliance burdens on suppliers and restores reliance on the statutory language itself, without insisting on extra procedural evidence.
Legal Background: Section 15 of the CGST Act,2017 lays down rules for determining the value of supply.
Specifically, Sub-section (3)(b) deals with post-sale discounts. The relevent provision is as under:
(3) The value of the supply shall not include any discount which is given-
(a) ….
(b) after the supply has been effected, if-
(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.
Consequently, exclusion of post-discounts from taxable value is permitted subject to fulfilment of specific conditions, as mentioned above. As regards the first two prerequisites viz: establishment of prior agreement and linkage to the specific invoice, remain under the supplier’s control. The third requirement which mandates ITC reversal by the recipient, falls beyond the supplier’s control. As here is no mechanism at supplier’s end to verify the reversal of the ITC by the reciepints, suppliers are facing difficulties in providing the evidence in this regard. Keeping this in view, CBIC, vide the circular No. 212/6/2024-GST.dt. 26.06.2024 outlined certain guidelines as detailed below:
1. The supplier has to procure a certificate from the recipient, issued by a Chartered Accountant (CA) or Cost Accountant (CMA), certifying that the proportionate ITC attributable to the discount (through credit notes) has been reversed by the recipient.
2. The CA/CMA certificate was to contain details such as:
-
- particulars of credit notes,
- corresponding invoice numbers,
- amount of ITC reversed in respect of each credit note, and
- reference of the return/FORM GST DRC-03/other document through which reversal was made.
3. The certificate had to carry a Unique Document Identification Number (UDIN), verifiable on ICAI/ICMAI portals.
4. Where the tax amount involved in discounts through credit notes did not exceed ₹5 lakh in a financial year, instead of a CA/CMA certificate, the supplier could obtain a self-certificate/undertaking from the recipient confirming ITC reversal, with the above details.
Thus, the circular attempted to standardize the approach across field formations by prescribing a procedure for suppliers to establish evidence of ITC reversal by recipients. While the intention was to ensure uniformity and protect revenue, this procedure effectively transferred the burden of proving the recipient’s compliance onto the supplier. With this change, businesses faced practical hurdles, as recipients were often unwilling to provide certifications, and the insistence on professional certification increased cost and compliance complexity. Recognising the hardship caused, CBIC has now withdrawn Circular 212/6/2024 through Circular 253/10/2025. The withdrawal makes it clear that suppliers are no longer required to furnish certificates, undertakings, or other forms of evidence regarding ITC reversal by recipients. However, the recipient is still legally obliged to reverse proportionate ITC attributable to discounts.
The withdrawal has several important implications:
1. Reduced Compliance Burden: Suppliers need not chase recipients for confirmations or certifications of ITC reversal.
2. Ease of Doing Business: Commercially, discounts are a normal trade practice. With the removal of procedural hurdles, businesses can now extend post-supply discounts more smoothly.
3. Focus on Law Alone: The position is now aligned with Section 15(3)(b)(ii), without extra requirements that went beyond the Act.
Conclusion :
The withdrawal of Circular 212/6/2024 is a welcome and pragmatic step by CBIC. By eliminating the requirement to produce evidence of ITC reversal, it removes an artificial compliance barrier that was causing disputes and delays. At the same time, it does not dilute the law — recipients must still reverse proportionate ITC where discounts are availed.
Author’s Opinion:
In practice, whenever a supplier issues a credit note and reduces the taxable value in his GSTR-1, the same automatically reflects at the recipient’s end in GSTR-2A/2B. Consequently, the recipient has to take cognizance of this adjustment, since any failure to reverse ITC would create a mismatch between GSTR-2A and GSTR-3B, which is easily traceable in the system. Therefore, even without the procedure prescribed under the withdrawn circular, the GST return mechanism itself ensures a natural check on ITC reversals.
*****
Disclaimer: The author is a Superintendent in Central Taxes. The views expressed in this article are strictly personal.
Author Bio
Yes. Circular 253/ 2025 dt 1.10.2025 is issued as per 56th Council’s decision to rescind the Circular No.212/2024 on CA/ CMA certificate.
Suitable changes will be made to Section 15(3)(b) with regard to extending discounts and to Section 34 of CGST Act 2017 on issuing discount related credit notes, in the next budget.