Invoice-linked discount deduction requires nexus with the sales covered; past-performance incentives do not qualify under VAT rules.

Quantity or scheme discount is deductible under Rule 3(2)(c) of the Karnataka Value Added Tax Rules, 2005 only when it is allowed in accordance with regular practice or a contract and is shown in the tax invoice for the relevant sales. A discount granted as an incentive for earlier performance, even if reflected in the invoice, does not relate to the sales covered by that invoice and therefore fails the rule. On that basis, such a discount is not deductible from total turnover when it is unconnected with the invoiced sale transaction.

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Issues: Whether quantity or scheme discount shown in the tax invoices, but referable to earlier performance and not to the sales covered by those invoices, is deductible from the total turnover under Rule 3(2)(c) of the Karnataka Value Added Tax Rules, 2005.

Analysis: The charging provisions of the Karnataka Value Added Tax Act, 2003 and the scheme of determination of total turnover and taxable turnover require that deductions be allowed only in the manner prescribed. Rule 3(2)(c) permits amounts allowed as discount, but its proviso requires that the discount be in accordance with the regular practice of the dealer or a contract and that the tax invoice or bill of sale issued in respect of the relevant sales shows the amount of discount. The discount must therefore relate to the sales reflected in the same invoice. A discount granted as an incentive for past performance, even if mentioned in the invoice, is not a discount relatable to the sales covered by that invoice and does not satisfy the rule.

Conclusion: Such quantity or scheme discount is not deductible under Rule 3(2)(c) of the Karnataka Value Added Tax Rules, 2005 when it is unrelated to the sales covered by the tax invoice. The revisional order restoring the assessment was .

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