Post Sales Discount -Withdrawal of Circular No. 105/24/2019-GST dated 28.06.2019 vide Circular No. 112/31/2019–GST dated 3rd October, 2019

Legal Provisions (Sec 15(3) of the CGST Act 2017):

Amount of discount can be reduced for charging GST in the following circumstances:

  • Discount offered before or at the time of supply (Discount mentioned on invoice itself)
  • Discount offered after supply has been affected (Discount through CN-said discount were known at the time of supply)

However due to ambiguity in the provisions and decisions of AAR there was need for clarifications on Post Sales discount offered by the supplier by CN with respect to

> Whether supplier is required to reverse his GST liability to the extent of discount offered?

> Can supplier issue FCN without GST?

> Whether customer/dealer is required to reverse ITC, if FCN is issued by supplier in terms of second proviso to Sec 16(2) of CGST Act 2017?

The said issues were examined by Govt. and clarified vide C.B.I.&.C. Circular No. 105/24/2019-GST dated 28.06.2019

A. Discount without any obligation on the part of dealer:

Supplier in such case issue CN with GST and dealer is required to reverse the ITC.

B. Discount with some obligation on the part of dealer:

Here the dealer, being supplier of services, would be required to charge applicable GST on the value equal to the amount of discount received and the supplier of goods being recipient of services, will be eligible to claim ITC, of the GST so charged by the dealer.

C. Discount by supplier to offer price reduction by dealer to customer:

The customer if registered would be eligible to claim ITC of the tax charged by the dealer only to the extent of the tax paid by the said customer to the dealer as per second proviso to Sec 16(2) of CGST Act 2017

D. Discount by way of FCN:

Now Govt. has clarified that dealer will be eligible to take ITC of the original amount of tax paid by him to the supplier of goods and he will not be required to reverse proportionate ITC attributable on such post sale discount received by him through issuance of FCN by the supplier of goods.

However, due to suspicion and to ensure further uniformity in the implementation of the provisions of the law across field formations, the Board decided to withdraw clarification given vide C.B.I.& C Circular No. 105/24/2019-GST dated 28.06.2019.

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November 2020