Discount can be classified in to 3 categories:

1. Post Sale Discount( Terms and conditions established on or before sales contract – Clarification Point No. 5 (Through Commercial Credit Note by Seller without GST)

2. Additional discount – For Additional activities such as Advertisement – Clarification Point No. 3 ( Through Tax Invoice by Dealer) – Added to dealer’s turnover to calculate GST

3. Additional discount – For secondary – consumer schemes – Incentive cum compensation for reduced price to dealer) Clarification point No. 4 (Through Tax Invoice by Dealer)- Added to dealer’s turnover to calculate GST

GST credit note can be passed only for the below mentioned transactions

1. Sales Return

2. Price Revision

All other claims in the form of reimbursement of Advt ( as per clarification point no3) and compensation of consumer schemes on account of reduction in prices for Para -5, can be routed through tax invoice raised by the dealer, except post sale discount passed through commercial credit notes.

1. Post Sale Discount – Clarification Point No.5

Process:

Treatment by Seller: If dealer eligible to get the discount, seller can raise Commercial Credit Note for Rs.1,00,500/-without disturbing the Output tax liability.

Treatment by Dealer:  Dealer can avail input tax credit of Rs.6,03,000/- and No need to reverse the Input tax credit while accounting credit note of Seller

Example:

Invoice details of Seller

Sl No INV NO DATE Item Qty Rate Value GST Total Invoice value Eligible Incentive as per Trade Circular
1 W0018-20001 01/04/2019 1234 300 3350 1005000 180900 1185900  1,00, 500.00
2 W0018-20020 20/04/2019 1234 700 3350 2345000 422100 2767100
1000 3350000 603000 3953000

2. Additional discount – For Additional activities such as Advertisement – Clarification Point No.3

Process:

If the company proposes to give Additional discount of Rs.1,00,000 to carry out the additional activities such as Advertisement, then

Dealer: To issue the Tax invoice on the Discount value proposed by Seller Company with GST and the same need to be shown in their GSTR-1 which makes seller company hassle free to avail the Input tax credit under section 16

Seller: Seller company can avail the Input tax credit on the invoice raised by dealer on account of support services.

Invoice details of seller – Business support services( Advt)

Sl No INV NO DATE Item Qty Rate Value GST Total Invoice value
1 ADV-1 0/04/2019 BSS 1 100000 100000 18000 118000
1 100000 18000 118000

3. Additional discount –   For secondary – consumer schemes – Clarification point No.4

Process:

If the company proposes to give Additional discount of Rs.90,000/- towards consumer schemes against reduced sale to customer

Dealer: To issue the Tax invoice on the Discount value proposed by Seller Company with GST (refer Table 3)and the same need to be shown in their GSTR-1 which makes seller company hassle free to avail the Input tax credit under section 16

Seller: Seller company can avail the Input tax credit on the invoice (table 3) raised by dealer on account of support services.

Invoice details of Seller (Table 1)
Sl No INV NO DATE Item Qty Rate Value GST Total Invoice value
1 W0018-20001 01/04/2019 1234 300 3350 1005000 180900 1185-900
Additional Discount (Table 2)
Sl No Original Inv Ref No DATE Item Qty Rate Discount value
1 NA NA 1234 300 300 90000
Invoice details of Dealer to Seller (Table 3)
Sl No INV  NO DATE Item Qty Rate Value GST Total Invoice value
1 AD-con 30/04/2019 Incentive 300 300 90000 16200 106200
Invoice details of Seller to the customer
Sl No INV NO DATE Item Qty Rate Value GST Total Invoice value
1 D-1 30/04/2019 1234 300 3050 915000 164700 1079700

Total Taxable value of the dealer Rs.10,05,000/- ( Rs.915000+90000)

Author Bio

Name: sahubar
Qualification: Graduate
Company: PREETHI KITCHEN APPLIANCES PVT LTD
Location: CHENNAI, Tamil Nadu, IN
Member Since: 29 Nov 2018 | Total Posts: 1

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