There are Several Promotional Schemes (like Free Samples, Buy One Get One free offer, Discounts including ‘Buy More, Save More’ offer, Secondary Discount) which are offered by taxable persons to increase sales volume and to attract new customers for their products. Generally, the distribution of free samples method is usually adopted by newer products to increase his market area and to attract new customers for their products. Please note that free samples are generally distributed to unrelated person without any consideration for purpose to increase the business, market area and to attract new customers for their products. It is not so that the free samples could not be distributed to related person, it can be, but it is pertinent to note that supplies to related person without consideration are covered under Schedule I of the Central Goods and Services Tax 2017 (‘CGST, 2017’).
It means the chargeability of tax on the scheme of free supplies is required to be tested in accordance with Schedule I of the CGST, 2017. Moreover, implications of discounts shall be examined in accordance with Section 15 of CGST, 2017 which governs value of supply of particular transactions executed and the tax consequences in regard to the above promotional schemes need an examination in the light of restrictions imposed for availment of input tax credit (‘ITC’) & attention is invited towards the provisions of Section 17(5) of the CGST, 2017.
First of all, it is to be noted that there is no definition of discount under GST law. Different types of discounts, may be categorised under two types: –
1) Discounts which are given before or at the time of supply and recorded in the invoice at the time of supply, like
a. trade discount at the time of supply;
b. special discount for making full payment in advance;
c. bulk purchase discount, say, additional discount of 5% on purchase of worth of Rs. 50,000/- or more;
d. get 10% discount on purchase worth of Rs. 25,000/- ad above, 15% discount on purchase of worth of Rs. 50,000/- and above
e. buy six plates made of steel, get a set of two bowl made of steel free;
f. buy two pastes of 100 gm each and get one tooth brush free;
g. buy three shirts and get one shirt free;
h. buy 10 cartoons of biscuits and get 100 ml of one coconut oil bottle free;
2) Discounts which are given after the sale has been effected, like
a) additional discount of 2%, say, on payment being made within 10 days from the date of invoice;
b) additional discount of 3%, say, for lifting of 10,000 cartoons of 100 ml coconut oil bottle during a specified period.
c) special discount of 2%, say, for meeting the yearly purchase target by a recipient (distributor, dealers etc.)
Legal position of discount under provisions of Section 15(3)(a) and (b) of CGST Act, 2017.
Numerous kinds of discounts are given by the suppliers to their customers namely, trade discount, cash discounts, quantity/volume/performance discounts etc. such discount are reduced from the sale price of the supply. Since, the value of a taxable supply is the transaction value, GST is leviable on the value after deducting the discount.
However, not all discounts offered by the supplier to their customers are allowed as a deduction from the value. Only such discounts which satisfy the conditions prescribed in Section 15(3) of CGST 2017, are allowed as deduction from the value. The essence of the conditions prescribed in Section 15(3) of CGST 2017 is that the price as established which do not fulfil the conditions specified in Section 15(3) of CGST 2017 are not deductible from the value i.e. GST in such case is levied on the gross value of the supply without considering the discount.
The provisions of Section 15(3) of CGST 2017 may be read as under:
“The value of supply shall not include any discount which is given-
(a) Before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
(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 invoice; 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.”
From perusal of the above, if conditions laid down in section 15(3) of the CGST Act, 2017 are satisfied, the discount value shall not be included in taxable value of supply and GST shall be charge by supplier on net value i.e. taxable value minus discount. In case of discount offered before or at the time of supply, then there is no problem to supplier because in this case discount shall be mentioned on invoice itself by supplier and GST shall be leviable on net taxable value i.e. taxable value minus discount.
But post-sale discount, shall not form part of the value of supply only if it satisfies the following conditions.
- There exists and agreement for discount which was entered into between the parties either at or before the supply took place;
- The supply was made in accordance with such agreements and must not for any other supplies;
- Such discount must be specifically linked with invoices vide which supply was made under the agreement.
- ITC attributable to such discount have been duly reversed by the recipient.
It is necessary that prior and proper documentation holds the key for the purpose of excluding discount from the value of supply. Let’s take an example- Suppler made supply of Rs. 1,00,000 to the dealer along with GST @ 18%. As there is exist an agreement between the parties for discount, therefore, later on supplier gives a discount of Rs. 10,000/- to dealer. In this case as the supplier has to issue a ‘Credit Note’ to the dealer of Rs 10,000/- along with GST Rs. 1800/-. Therefore,
a. discounts which have met the conditions as stipulated under section 15(3)(b) will be netted off against outward taxable supplies and tax amount under Table No. 3.1.(a) of GSTR-3B by the suppler.
b. Further, as the supplier had filed its GSTR-1 with Rs. 18,000, therefore, the dealer has already claimed the input tax credit of Rs. 18,000/-. Now, supplier has to rectify taxable value of supply of Original Invoice (i.e. will reduce taxable value) by showing ‘Credit Note’ against original invoice in his GSTR-1–
-
- In case of B2CS: to be shown inn Table 7 after reducing from taxable value and tax amount; and
- In case of B2B: to be shown in Table 9B as a separate document.
and Form GSTR-9:
i. Invoice and credit note, both pertains to the same financial year, say for an example, July 2017 to March, 2018
> In case of B2C transaction, reduce the table value and tax, to be shown in Table 4A;
> In case of B2B transaction, the value of Credit Note is to be shown separately in Table 4l;
ii. Invoice relate to the period, say, July, 2017 to March 2018 and credit note was issued during the period April, 2018 to March, 2019;
> In case of B2B and B2C, both, value of credit note is to be netted off from invoice raised and to be shown in table 11.
c. Moreover, after issuing a ‘Credit Note’ linked with original invoice, by supplier, the dealer has to reversed ITC of Rs. 1800/- in his GSTR-3B i.e. value of Credit Note is to be netted off from invoice raised.
One more thing which is very important to note herein that provisions of Section 15(3)(a) and (b) of CGST Act, 2017 are applicable in both i.e. pre-sale discount and post-sale discount but limited to only in that case where discount are known at the time of supply to the recipient. It means post sale discount which are not known to the recipient at the time of supply shall not be governed by the provisions of Section 15(3) of CGST Act, 2017. Thus, there is lot of confusion regarding the treatment of secondary or post sale discounts which were not known to the recipient at the time of supply.
For instances: The agreement of XYZ Ltd. with its dealers is that purchase of fans over 1000 pieces in the Diwali month will entitle them to discount 5% per fan. Therefore, the quantum of discount can be determined only at the end of Diwali month. However, since the agreement relating to such discount was in existence at the time of supply, and the discount can be worked out for each invoice, such post supply discount will be allowed as a deduction from the value of such supply of fans. XYZ Ltd. can issue credit note for 5% of the value of goods along with GST and claim adjustment of excess tax paid. The dealer must reverse the proportionate ITC on the relevant stock to bring it in line with reduced tax.
For instance: A Ltd. sold goods to B Ltd. on 25th June 2022 at Rs. 50,000 (exclusive taxes and discounts) and charged Rs. 9,000 as IGST @ 18%, along with the terms of supply stipulated that discount @ 2% will be given to B Ltd. if it makes the payment within one month of the supply. Accordingly, A Ltd. issue the invoice of Rs. 59,000 [Rs. 50,000 (Price of Goods) +Rs. 9000 (IGST)]. After getting the invoice from A Ltd., B Ltd. avails the ITC of Rs. 9,000 in the month of June, 2022.
Now, suppose B Ltd. makes the payment of the goods i.e. Rs. 59,000 on 20th July, 2022 (i.e. within one month of supply). Then A Ltd., immediate, will issue Credit Note for Rs. 1180 [Rs. 1,000 for value of discount and Rs. 180 for proportionate IGST leviable thereon] to B Ltd. After receiving credit note, B Ltd. reverses its ITC of Rs. 180 attributable to the discount given by A Ltd. and A Ltd. can reduce its GST liability of the month of July by Rs. 180.
In this case, ultimate payment by B Ltd. is Rs. 57,820 (Rs. 50,000 +Rs. 9,000 -Rs. 1,000- Rs. 180).
Further, in the said example, if the terms of supply did not provide for discount @ 2% for payment within one month but A Ltd. offers such discount to B Ltd. at the time of payment after negotiation, the discount will not be allowed as a deduction from the value. A Ltd. will issue a commercial credit note for only the value of discount, i.e. for Rs. 1,000. B Ltd. will not reverse any ITC and A Ltd. will also not able to reduce its GST liability for the month of July. In this case ultimate payment by B Ltd. is Rs. 58,000 (Rs. 50,000 +Rs. 9,000 -Rs. 1,000).
Circular No. 92/11/2019-GST dated 07th March, 2019
The Central Board of Indirect Taxes and Customs (‘Board’), vide their Circular No. 92/11/2019-GST dated 07th March, 2019, has examined these schemes and clarification on the aspects of taxability, valuation, availability or otherwise of ITC in the hands of the supplier. It is submitted that various representations have been received by Board seeking clarification on issues raised with respect to tax treatment of sales promotion schemes under GST regime. To ensure uniformity in the implementation of the law across the field formations, the Board, in exercise of its powers conferred under section 168(1) of the CGST, 2017 has issued aforesaid Circular No. 92/11/2019-GST dated 07th March, 2019. Some of these schemes have been examined and clarification on the aspects of taxability, valuation, availability or otherwise of Input Tax Credit in the hands of the supplier (“ITC”) in relation to the said schemes.
1. Distribution of free Samples and Gifts-
Whether the same is supply or not under GST?
It is a common practice among certain sections of trade and industry, such as, pharmaceutical companies which often provide drug samples to their stockists, dealers, medical practitioners, etc. without charging any consideration. As per subclause (a) of sub-section (1) of section 7 of the said Act, the expression “supply” includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Therefore, the goods or services or both which are supplied free of cost (without any consideration) shall not be treated as “supply” under GST (except in case of activities mentioned in Schedule I of the said Act). Accordingly, the Board clarified that samples which are supplied free of cost, without any consideration, do not qualify as “supply” under GST, except where the activity falls within the ambit of Schedule I of the CGST, 2017.
Position of ITC (in the hands of Supplier) in case of distribution of free Samples and Gifts.
It is further submitted that the ITC of goods distributed as free samples shall be ineligible in terms of blocked credit in accordance with Section 17(5)(h) of the CGST Act 2017. However, where the activity of distribution of gifts or free samples falls within the scope of “supply” on account of the provisions contained in Schedule I of the said Act, the supplier would be eligible to avail of the ITC. Thus, if the supplier avails ITC on account of a purchase of goods, and later distribute these goods as free samples, then supplier will have to reverse ITC so availed.
In nutshell: –
- goods or services or both which are supplied at free of cost (without any consideration) shall not be treated as ‘supply’ except in case of activities mentioned in Schedule I of the Act;
- further section 17(5)(h) of CGST Act, 2017 stipulates, ITC shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration;
- under such circumstances, such supply will not be considered as ‘supply’ as per the GST law and input tax credit (ITC) shall not be available to the supplier.
2. Buy One Get One free offer:
Taxability of supply under Buy One Get One free offer-
Sometimes, companies announce offers like ‘Buy One, Get One free’. For example, buy one soap and get one soap free’ or ‘Get one tooth brush free along with the purchase of tooth paste’. This method is, generally, adopted by FMCG companies and retails shopping outlets.
As per Section 7(1)(a) of CGST 2017, the goods or services which are supplied free of cost (without any consideration) shall not be treated as “supply” under GST (except in case of activities mentioned in Schedule I of the said Act). It may appear at first glance that in case of offers like ‘Buy One, Get One Free’, one item is being supplied free of cost without any consideration. In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one. Taxability of such supply will be dependent upon as to whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of Section 8 of CGST, 2017.
Position of ITC (in the hands of Supplier) in case of Buy One Get One free offer-
It is also clarified that ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to supply of goods or services or both as part of such offers.
3. Discounts including ‘Buy More, Save More’ offers:
Value of supply in case ‘Buy More, Save More’ offers-
Sometimes, the supplier offers staggered discount to his customers (increase in discount rate with increase in purchase volume). For example- Get 10 % discount for purchases above Rs. 5000/-, 20% discount for purchases above Rs. 10,000/- and 30% discount for purchases above Rs. 20,000/-. Such discounts are shown on the invoice itself.
Some suppliers also offer periodic / year ending discounts to their stockists, etc. For example- Get additional discount of 1% if you purchase 10000 pieces in a year, get additional discount of 2% if you purchase 15000 pieces in a year. Such discounts are established in terms of an agreement entered into at or before the time of supply though not shown on the invoice as the actual quantum of such discounts gets determined after the supply has been effected and generally at the year end. In commercial parlance, such discounts are colloquially referred to as “volume discounts”. Such discounts are passed on by the supplier through Credit Notes.
The Board clarified that discounts offered by the suppliers to customers (including staggered discount under ‘Buy more, save more’ scheme and post supply / volume discounts established before or at the time of supply) shall be excluded to determine the value of supply provided they satisfy the parameters laid down in Section 15(3) of the CGST, 2017, including the reversal of ITC by the recipient of the supply as is attributable to the discount on the basis of document (s) issued by the supplier.
The provisions of Section 15(3) of CGST 2017 may be read again as under:
“The value of supply shall not include any discount which is given-
A. Before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
B. After the supply has been effected, if-
(iii) Such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoice; and
(iv) 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.”
Position of ITC (in the hands of Supplier) in case of ‘Buy More, Save More’ offers-
It is further clarified that the supplier shall be entitled to avail the ITC for such inputs, input services and capital goods used in relation to the supply of goods or services or both on such discounts.
Position of ITC (in the hands of Recipient) in case of ‘Buy More, Save More’ offers-
Please note that recipient shall revers his ITC as is attributable to the discount on the basis of document (s) issued by the supplier (i.e. Credit Note).
4. Secondary Discounts (discounts which are not known at the time of supply).
Issuing ‘Credit Note’ for Secondary Discounts-
These are the discounts which are not known at the time of supply or are offered after the supply is already over. For example, M/s A supplies 10000 packets of biscuits to M/s. B at Rs. 10/- per packet. Afterwards M/s A re-values it at Rs. 9/- per packet. Subsequently, M/s. A issues credit note to M/s. B for Rs. 1/- per packet.
The provisions of sub-section (1) of section 34 of CGST, 2017 regarding issuing a credit note are as under:
“Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.”
Further, representations have been received from the trade and industry that whether credit notes(s) under Section 34(1) of the said Act can be issued in such cases even if the conditions laid down in section 15(3)(b) of the said Act are not satisfied?
The Board clarified that financial / commercial credit note(s) can be issued by the supplier even if the conditions mentioned in Section 15(3)(b) of the said Act are not satisfied. In other words, credit note(s) can be issued as a commercial transaction between the two contracting parties.
Value of Supply in case of Secondary Discounts-
The Board clarified that such secondary discounts shall NOT be excluded while determining the value of supply as such discounts are not known at the time of supply and the conditions laid down in section 15(3)(b) of the said Act are not satisfied.
Position of ITC (in the hands of Supplier) in case of Secondary Discounts-
There is no impact on availability or otherwise of ITC in the hands of supplier in this case.
Unsettled point in Circular No. 92/11/2019-GST dated 07th March, 2019 regarding secondary or post sale discount (discounts which are not known at the time of supply) offered by suppler by Credit Note.
Because of no clear provisions under GST law and decisions of AAR, there was need for clarification on secondary or post sale discount (discounts which are not known at the time of supply) offered by suppler by Credit Note-
- Whether supplier is required to reverse his GST liability to the extent of discount offered?
- As mentioned above, the Board has clarified in Circular 92 that financial / commercial credit note(s) can be issued by the supplier even if the conditions mentioned in Section 15(3)(b) of the said Act are not satisfied. In other words, credit note(s) can be issued as a commercial transaction between the two contracting parties. But Can supplier issue Fresh Credit Note (‘FCN’) without GST?
- Whether the dealer will be eligible to take ITC of the original amount of tax paid by the supplier of goods or only to the extent of tax payable on value net of amount for which such financial / commercial credit notes have been received by him?
Circular No. 105/24/2019-GST dated 28th June, 2019.
To settle the haze surrounding on treatment of post-supply discounts under GST, the Board issued a Circular No. 105/24/2019-GST dated 28th June, 2019 (“Circular 105”) captioned “Clarification on various doubts related to treatment of secondary or post-sales discounts under GST”. This Circular was issued pursuant to various representations submitted by the trade and industry seeking clarifications in respect of tax treatment in cases of secondary discounts or post sales discount, after Circular No. 92/11/2019-GST was issued on March 7, 2019 (Clarification on various doubts related to treatment of sales promotion schemes under GST).
The unsettled issues of Circular 92 were examined by Government and clarified vide Circular No. 105/24/2019-GST dated 28th June, 2019 (“Circular 105”) captioned “Clarification on various doubts related to treatment of secondary or post-sales discounts under GST”.
In this circular, it is mentioned that for the purpose of value of supply, post sales discounts are governed by the provisions of clause (b) of sub-section (3) of section 15 of the CGST Act, 2017. It is crucial to examine the true nature of discount given by the manufacturer or wholesaler, etc. to the dealer. It would be important to examine whether the additional discount is given by the supplier of goods in lieu of consideration for any additional activity /promotional campaign to be undertaken by the dealer.
A. Discount without any obligation on the part of dealer:
It was clarified that if the post-sale discount is given by the supplier of goods to the dealer without any further obligation or action required at the dealer’s end, then the post sales discount given by the said supplier will be related to the original supply of goods and it would not be included in the value of supply, in the hands of supplier of goods, subject to the fulfilment of provisions of sub-section (3) of section 15 of the CGST Act.
In this case, Supplier may issue ‘Credit Note’ with GST and dealer is required to reverse the ITC.
B. Discount with some obligation on the part of dealer:
If the additional discount given by the supplier of goods to the dealer is the post-sale incentive requiring the dealer to do some act like undertaking special sales drive, advertisement campaign, exhibition etc., then such transaction would be a separate transaction and the additional discount will be the consideration for undertaking such activity and therefore would be in relation to supply of service by dealer to the supplier of goods.
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:
It is further clarified that if the additional discount is given by the supplier of goods to the dealer to offer a special reduced price by the dealer to the customer to augment the sales volume, then such additional discount would represent the consideration flowing from the supplier of goods to the dealer for the supply made by dealer to the customer. This additional discount as consideration, payable by any person (supplier of goods in this case) would be liable to be added to the consideration payable by the customer, for the purpose of arriving value of supply, in the hands of the dealer, under section 15 of the CGST Act.
To augment the sales, the manufacturer gives a special discount in the form of reduced price by the dealer to customer. Such an additional discount represents the consideration flowing from the supplier of goods to the dealer for the supply made by dealer to consumer and hence, is subject to GST. In the above situation, the dealers will have to pay 18% GST on the post-sale discount that they get from the suppliers of goods, if the supplier asks them to pass on the concessions to the end consumer. For instance, imagine that a company sells a car to a dealer for Rs 10 lakh and later gives a discount of Rs 50,000. In doing so, the company did not put any obligation on the dealer to pass on the benefit. So, the dealer need not pay any GST on Rs 50,000. However, if the company asks the dealer to pass on the benefit to the customer, then the dealer has to pay GST on the entire amount, including Rs 50,000.
Moreover, 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 in view of second proviso to sub-section (2) of section 16 of the CGST Act.
D. Discount by way of FCN:
There may be cases where post-sales discount granted by the supplier of goods is not permitted to be excluded from the value of supply in the hands of the said supplier not being in accordance with the provisions contained in sub-section (3) of section 15 of CGST Act. It has already been clarified videCircular No. 92/11/2019-GST dated 7th March, 2019 that the supplier of goods can issue financial / commercial credit notes in such cases but he will not be eligible to reduce his original tax liability.
Doubts have been raised as to whether the dealer will be eligible to take ITC of the original amount of tax paid by the supplier of goods or only to the extent of tax payable on value net of amount for which such financial / commercial credit notes have been received by him. It is clarified that the dealer will not be required to reverse ITC attributable to the tax already paid on such post-sale discount received by him through issuance of financial / commercial credit notes by the supplier of goods in view of the provisions contained in second proviso to sub-rule (1) of rule 37 of the CGST Rules read with second proviso to sub-section (2) of section 16 of the CGST Act as long as the dealer pays the value of the supply as reduced after adjusting the amount of post-sale discount in terms of financial / commercial credit notes received by him from the supplier of goods plus the amount of original tax charged by the supplier.
In view of the above, now Government has clarified that dealer will be eligible to take ITC of the original amount of tax paid by him to 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.
Withdrawal of Circular No. 105/24/2019-GST dated 28th June, 2019.
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 Circular No. 105/24/2019-GST dated 28th June, 2019. The Board in exercise of its power conferred by Section 168(1) of the CGST Act, 2017 has withdrawn, ab-initio, the said circular by Circular No. 112/31/2019-GST dated 3rd October, 2019.
Various arguments of the professionals against the Circular No. 105/24/2019-GST dated 28th June, 2019.
1. Passing additional discount by manufacturer/ supplier to the dealer is a pure financial transaction rather than being a ‘supply. By offering an additional discount to sell the product, the dealer or the manufacturer did not supply any goods or any extra services so as to make it chargeable to GST.
2. The entire idea of Circular 105 may have found justification where two dealers are not in a relationship of ‘supplier’ and ‘receiver’ for those particular goods on which discount is being given. But where the supplier has sold certain goods to the dealer, at first place, and then, some additional discounts are given to the same dealer and on the same underlying goods, then, it appears cryptic to treat this discount as an addition to the sales price of the dealer on subsequent transaction of sale to customers, rather than treating the same as discount on base transaction.
3. Equating ‘discounts’ with ‘consideration’ goes contrary to essentials of Indian Contract Act, 1872. The act of supplier giving a discount to the dealer to pass on the same to the end customer will not qualify as ‘consideration’ from the customer, since the amount has not been specified in the contract entered between dealer and customer. Even the ‘additional discount’ does not fit within the four corners of term ‘consideration’ as defined in GST law.
4. Including the amount of additional discount in value of supply by dealer to customer will negate the benefit of reduced prices to customer. Ultimately, the value of supply will be higher and how would the customer get the benefit of the reduced price? No clear parameters to determine whether “action is required” at dealer’s end. If the tax burden is ultimately to be borne by the supplier himself, then how the transaction will be routed?
5. Further, what would be the point of taxation in such cases? How to determine the correct point in time when the dealer is required to deposit GST on the amount of additional discount? Break in input tax credit (“ITC”) chain and double hit on manufacturers – reduced prices of commodities along with additional tax burden (non-creditable) on a value which is not even realized.
Finally, what is the position now?
1. Discounts which are given before or at the time of supply:- In case of discount offered before or at the time of supply, then there is no problem to supplier because in this case discount shall be mentioned on invoice itself by supplier and GST shall be leviable on net taxable value e. taxable value minus discount.
2. Discounts which are given after the sale has been effected: – in this case, there may be two situations –
a. One, if the conditions under section 15(3) of the CGST Act, 2017 have been met:- If conditions laid down in section 15(3) of the CGST Act, 2017 are satisfied, the discount value shall not be included in taxable value of supply and GST shall be charge by supplier on net value e. taxable value minus discount.
b. Second, if the conditions under section 15(3) of the CGST Act, 2017 are not met:- Please note that by withdrawing the Circular No. 105/24/2019-GST dated 28th June, 2019, the unsettled issue of Circular No. 92/11/2019-GST dated 07th March, 2019 shall remain exist. In the interest of ease of doing business and to ensure no litigation on this issue in future, concept of commercial/ financial credit note (without GST) must be applied uniformly to all such scenarios of post-sales discounts, falling short of the conditions as mentioned under Section 15(3)(b) of the CGST Act, 2017. It is needless to mention that the CBIC itself has accepted the concept of a commercial/ financial credit note (without GST) in its earlier circular dated March 7, 2019, which was reiterated in Circular 105 as well.
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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.
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