Applicant entitled to full Input Tax Credit on GST without reversal for post-purchase discounts.

The ruling determined that the applicant can avail Input Tax Credit (ITC) of the full GST charged on invoices without requiring a proportionate reversal for post-purchase cash discounts and incentives provided through credit notes without GST adjustment. It was clarified that GST is not leviable on such cash discounts and incentives/schemes offered through credit notes without GST adjustment, as they are considered discounts on the original supply and not separate supplies. The ruling remains valid unless declared void under the relevant provisions of the GST Act.

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Issues Involved:
1. Whether the applicant can avail the Input Tax Credit (ITC) of the full GST charged on invoices or if a proportionate reversal is required in case of post-purchase cash discounts and incentives/schemes provided through credit notes without GST adjustment.
2. Whether GST is leviable on cash discounts offered through credit notes without GST adjustment.
3. Whether GST is leviable on incentives/schemes provided through credit notes without GST adjustment.

Detailed Analysis:

1. Availment of ITC on Full GST Charged on Invoices:
The applicant sought clarity on whether they can avail ITC on the full GST charged on invoices when cash discounts and incentives are provided post-purchase through credit notes without GST adjustment. As per Section 15(3)(b) of the CGST Act, discounts given after supply shall not be included in the value of supply if they are established in terms of an agreement entered into at or before the time of supply and specifically linked to relevant invoices, and if ITC attributable to the discount has been reversed by the recipient. The applicant argued that the cash discounts and incentives are not part of the purchase contracts or invoices and are determined post-supply, hence not requiring ITC reversal. The ruling confirmed that since the discounts are not as per prior agreement, no proportionate reversal of ITC is required, provided the supplier does not reduce their output tax liability.

2. GST on Cash Discounts:
The applicant questioned whether GST is leviable on cash discounts offered through credit notes without GST adjustment. The ruling referred to Circular No. 92/11/2019-GST, which clarifies that secondary discounts not known at the time of supply shall not be excluded while determining the value of supply. Since these discounts are not part of the original supply agreement, they do not affect the value of supply, and thus, no GST is leviable on such cash discounts.

3. GST on Incentives/Schemes:
The applicant also inquired about the GST applicability on incentives/schemes provided through credit notes without GST adjustment. The ruling stated that these incentives are not considered separate supplies but are discounts on the original supply. Therefore, no GST is leviable on these incentives, provided there is no adjustment of GST in the credit notes.

Conclusion:
The ruling concluded that the applicant can avail the ITC of the full GST charged on the invoices without proportionate reversal for commercial credit notes issued for cash discounts and incentives if these discounts are not covered under Section 15(3)(b) of the CGST Act and are not as per prior agreement. Additionally, no GST is leviable on cash discounts and incentives/schemes offered through credit notes without GST adjustment, as these are not considered separate supplies. The ruling is subject to the provisions under section 103(2) and remains valid until declared void under Section 104(1) of the GST Act.

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