GST on Discount

[Vivek anandhan]

Dear Experts

We are receiving discount from our principle supplier following manner

1. Cash discount At the time of supply of goods with following points

a. While making payment with in three days from the date of Invoice, our supplier giving discount 0.25%
b. Discount applicable on total invoice value
c. Payment will be settled after adjustment of discount for the same invoice
d. GST worked out entire value without considering reduction of cash discount
e. Rate of cash discount has been mentioned on the invoice itself.

2. Post supply discount received from supplier with following points

a. After purchase of goods from Supplier, we are getting discount based on Performance/volume/Special Price approval/Target Incentive
b. It is no were recorded in the invoice
c. Credit note will be issued in our favour without considering GST
d. This discount amount will be adjusted in another supply invoice

We are availing full GST credit based on the supply Invoice without considering of the above two type of discount received from our principle supplier.

Kindly clarify whether we required any ITC reversal to the extend of discount received.

[DR.MARIAPPAN GOVINDARAJAN]

If there is an agreement between the parties as to the discount then GST is not attracted for such discounts. The invoice shall indicate the nature of discount.

[KASTURI SETHI]

Reversal of ITC is required in view of the scenario explained by you.

[KASTURI SETHI]

Also go through the latest decision of AAR, Tamil Nadu reported as 2019 (3) TMI 928 - AUTHORITY FOR ADVANCE RULING, TAMILNADU Applicant : MRF Ltd. Decided on 22.1.19.

AI Summary

Treatment of discounts under GST: undisclosed post supply discounts can trigger input tax credit reversal where taxable consideration is reduced. Cash discounts shown on the invoice and agreed between parties reduce taxable value and need not attract GST; if the supplier charged GST on full value despite an invoiced cash discount, the invoice disclosure and payment adjustment affect treatment. Post supply discounts not recorded on the original invoice and given by credit note or by adjustment against later supplies can require the recipient to reverse Input Tax Credit to the extent the discount reduces the taxable consideration, unless the reduction is properly documented.