TRADE DISCOUNT

[Mahesh Dhanaboina]

Dear Professionals,

We are giving discount to our customers on attainment of Target Sales with us on Aggregate Basis.We are issuing credit notes charging GST towards such discount. But, Our customers are telling as per their Auditor's advice that gst will not applicable on such discount as it is not related to a single invoice.

In the similar manner, we are also receiving credit notes without charging gst from our suppliers on Target Discount.

We would like to know whether gst is applicable on such discount.

[DR.MARIAPPAN GOVINDARAJAN]

If there is an agreement as to trade discount between the sellers and buyers GST is not applicable. In such cases the same is to be indicated in the invoice.

[Yash Jain]

Sir,

The contention of customers auditor is against intention of gst law. The law does not allow dual benefit of discount and full ITC. ITC is also to be reversed in proportion of discount.

Act has been amended wef from 29.08.2018. Now single CN can be issued against multiple invoices. Issue single CN for invoices on FIFO basis.

Your practice is absolutely right.

AI Summary

Trade discount: GST excluded if agreed, but input tax credit must be proportionately reversed; single CNs permitted.
Where a trade discount is agreed, GST is not leviable and the discount should be indicated on the invoice; however, GST law prevents dual benefit so Input Tax Credit must be proportionately reversed where discounts affect taxable value. An amendment permits issuance of a single credit note against multiple invoices, often applied on a FIFO basis, requiring appropriate ITC reversal and invoice disclosure.