GST on Discount Received from Cement Manufacturer

[chandan bera]

Proprietorship business concern has been registered under GST Act and business of wholesales cement purchasing from cement manufacture. This proprietorship business concern received large amount discount from manufacture without effecting any GST is correct or wrong? If wrong who is liable for GST invoice of discount and payment of Tax?

[KASTURI SETHI]

Reply cannot be given in the form of 'YES" or 'NO'. It appears that you have got post-supply discount. Such discount can be excluded from the taxable value, if the following conditions are satisfied:-

(a) Discount must be prior known to the buyer in the form of a pre-supply agreement to be executed between the supplier and the buyer/receiver.

(b) Such discount should be correlatable with the relevant invoices.

(c) ITC attributable to such discount is reversed by the buyer/recipient. .

If you do not fulfill the above conditions, practice adopted is wrong. The supplier has to first rectify the procedure, if above mentioned conditions are not met with.

AI Summary

Post-supply discount exclusion allowed if pre-supply agreement, invoice correlation and recipient reversal of input tax credit occur.
A post-supply discount may be excluded from taxable value only if: (1) the discount is provided under a pre-supply agreement known to the buyer; (2) the discount is correlatable with the relevant invoices; and (3) the buyer/recipient reverses any attributable input tax credit. If these conditions are not met, excluding the discount from taxable value is incorrect and the supplier must rectify the invoicing and tax treatment.