Ahilya Chamber of Commerce & Industry, Indore has made a representation to The Chairman, GST Council on confusion related to Treatment of GST on Post Sale Commercial Credit Notes for Price Reduction. Text of the representation is as follows:-
Ahilya Chamber

The Chairman,                           12/06/2019
GST Council,

Dear Sir,


It is customary to issue commercial credit notes for price discounts, without GST reduction, in so many trades and despite clarifications issued vide Circular No. 92/11/2019-GST dated 7th March, 2019; certain doubts still remain as to whether the same will be construed as non-compliance either by the supplier or the recipient of goods even if the supplier has not reduced its GST liability.

If the supplier is issuing Commercial credit note without reducing GST tax liability in the month of issuance of Credit note. i.e. he/she is considering Tax liability as it is as per Original Invoice and same invoice is shown in GSTR-1 in the month of Issuance of Credit Note and supplier is not showing any commercial Credit note in GSTR-1 Return; the recipient’s GSTR 2 will only reflect the original tax invoice, and the value of that tax invoice will be value of supply for ITC purpose. Hence, recipient, as a customer, will be fully compliant if he/she takes ITC as per original tax invoice. Since such supplies are not covered by RCM, there cannot be any GST liability on the recipient of such Credit Notes.

Our submission is that if the supplier has not reduced its GST liability to the extent of the relevant amount, issuance of such commercial credit notes for price discounts do not result in any loss to the exchequer and a clearly worded notification saying that no tax liability will arise in such cases, either on the supplier or the recipient, needs to be issued in this regard to avoid double taxation.  

Very truly yours

Sushil Sureka

General Secretary

Ahilya Chamber of Commerce & Industry
410 , Commerce House,4th Floor,
7, Race Course Road,
INDORE – 452003
Phones: + 0731 2532241 & 4085241

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  1. रसनिधि कुमार गुप्ता says:

    GST कौंसिल के इस निर्णय से बहुत से ऐसे डिस्ट्रीब्यूटर जो थोक में मॉल खरीद कर रिटेल में बैचते हैं उन्हें तो यह quantity डिस्काउंट बाद में मिलता हैं अत: वे पहले से कीमत कैसे कम कर सकते हैं |
    GST कौंसिल के इस निर्णय का हम स्वागत करते हैं |
    धन्यवाद , रसनिधि

  2. Prasanna Kumar says:

    Sir, it’s true there is no tax liability. But the benefit of price reduction is not reaching the end users and Gov’t also is not able to know who is benefited from these types of frauds. If so reduce the billing value why you need to bill so much higher and later give credits. I have seen a trader turnover 2.5 crs discounts 12-14 lacs. Means the last chain rural and small towns they have to purchase at MRP which is very high all the cash sales will be pocketing and show Credits as 8% profits to avoid all taxes. Either bill for lower value else issue GST credit notes Govt will track the same.

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November 2020