As per the recent circular 105/24/2019 dated 28th June 2019 CBIC has clarified the various doubts related to treatment of secondary or post sale discounts under GST.
Scenario 1: if post sale discount is given without any further obligation or actions on dealer end. In that case the post-sale 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.
Or discount decided at the time of sale but determined in future then in that case supplier will issue credit note to the dealer.
Let us understand with example: Suppose one dealer going to buy 15 computers at Rs. 22000/- per piece but he has the consideration of 10 computers only, and the supplier has said that you can buy 10 computers with me at Rs 25,000/- and if you buy the balance quantity then we will issue a post-sale discount to you. In that case after completion of balance purchase sale transaction, the supplier will issue the credit note to the delaer.
Scenario 2: if post sale discount is required some obligation or action on dealer end, like undertaking special sales drive, advertisement campaign, exhibition etc in that case the transaction are treated as separate transaction and the dealer will issue a separate invoice on such transaction. It means:—-
|On Supplier Boooks||On Dealer Books|
|Dealer Account Dr
|Purchase account Dr.
|Incentive Expenses Dr.
|Supplier account Dr.
(Being Post Sale discount is treated as separate transactions)
Hence, by treating this transaction the output tax liability of supplier are not reduced but he may get the benefit of Input tax credit.
Scenario 3: If additional discount is given by the supplier of goods to the dealer to offer a special reduce price by the dealer to the customer to augment the sale volume, then such additional discount would represent the consideration flowing from the supplier to the dealer for the supply made by the dealer to the customer.
Let us understand with example: Suppose a supplier of goods instruct the dealer that they would buy a certain item at Rs 1000 and sold to the customer at Rs. 800 in the augment of sale volume, and the supplier would pay him Rs. 400 to dealer if they able to sold the requisite quantity.
In this case that Rs. 400 is a separate transaction and the dealer of the goods would require to book that transaction as incentive income and the customer is eligible to claim ITC only of Rs. 800 transactions.