New Delhi: The Central Board of Indirect Taxes and Customs (CBIC) has issued a clarification on how secondary or post-sale discounts will be treated under the Goods and Services Tax (GST).
The move comes after several representations were received seeking clarity on whether such discounts affect tax liability and input tax credit (ITC).
According to the circular, CBIC said that when a supplier issues financial or commercial credit notes for discounts, the recipient will still be eligible to claim full input tax credit.
“This is because such credit notes do not reduce the original transaction value or the tax liability charged on the supply. Therefore, businesses receiving goods at a discounted rate will not have to reverse their ITC,” CBIC added. The circular also clarified that post-sale discounts given by manufacturers to dealers should not be treated as additional consideration for the dealer’s supply of goods to the end customer.
CBIC explained that the relationship between manufacturers and dealers operates on a principal-to-principal basis, and such discounts are generally meant to push sales through competitive pricing. However, the clarification noted that where a manufacturer has an agreement with an end customer to supply goods at a discounted price, and provides credit notes to the dealer for this purpose, such discounts will be considered part of the overall consideration. (IANS)
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