Introduction
The Central Government, through Notification No. 03/2026-Central Tax dated 26th October 2026, has brought Section 154 of the Finance Act, 2026 into effect from 1st November 2026.
This amendment relates to Section 34(1) of the CGST Act, 2017, which deals with the issuance of GST credit notes and debit notes.
It specifically provides for the issuance of GST credit notes in respect of qualifying post-supply discounts.
1. What Was the Earlier Provision?
Section 34(1) of the CGST Act deals with situations in which a supplier can issue a credit note.
Under the earlier provision, credit notes could generally be issued in situations such as:
- The taxable value charged in the invoice was more than the actual taxable value.
- Excess GST was charged.
- Goods supplied were returned by the recipient.
- Goods or services supplied were found to be deficient.
Businesses also faced practical difficulties in adjusting GST for certain post-supply commercial discounts.
2. What Is the New Amendment?
Section 154 of the Finance Act, 2026 amends Section 34(1) of the CGST Act.
The amendment expressly includes discounts covered under Section 15(3)(b).
This allows suppliers to issue GST credit notes for qualifying post-supply discounts.
The amendment is closely connected with Section 153 of the Finance Act, 2026, which relaxes the conditions for excluding such discounts from taxable value.
In simple terms, Section 153 provides the valuation benefit, while Section 154 provides the credit note mechanism.
3. Important Compliance Points
Businesses should remember the following:
- A proper GST credit note must be issued.
- The recipient must reverse the ITC attributable to the discount.
- The supplier must comply with the applicable requirements of Section 34.
- The prescribed statutory timelines must be followed.
- Proper reconciliation should be maintained between suppliers and recipients.
Issuing a credit note alone does not automatically permit reduction of output tax liability. The applicable statutory conditions must also be satisfied.
Conclusion
Section 154 of the Finance Act, 2026 provides express recognition for issuing GST credit notes against qualifying post-supply discounts.
When read along with Section 153, this amendment provides greater flexibility in managing year-end discounts, turnover incentives and other commercial arrangements.
It is an important change for manufacturers, traders, distributors and GST professionals.
Effective Date: 1st November 2026.
Legal Reference: Section 154 of the Finance Act, 2026 read with Section 34(1) of the CGST Act, 2017.
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