Discounts under GST regime Sec.15 of the CGST Act, 2017, reproduced below, deals with the provision of discount, as under: “The value of the 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 invoices, 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.”
The logical inference
which could be drawn from plain reading of above provision is:
1. Discount, if
mentioned on the face of the invoice, can be reduced from the taxable value of
the supply of goods.
2. Discount, even if not mentioned on the face
of the invoice can be reduced from the taxable value, if following conditions
are satisfied:
i) Discount is established in terms of an
agreement before supply. In simple words, both supplier and recipient are aware
and have agreed about the discount before the supply.
ii) Discount is linked
to a specific supply invoice.
iii) ITC attributable to
the discount is required to be reversed by the buyer or recipient of the
supply.
GST liability of the
supplier would be reduced if both supplier and receiver of the goods or
services are aware of the discount before supply.
There will be no
differentiation in GST between trade and cash discounts.
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