TREATMENT OF DISCOUNT IN GSTR3B

[NAMAN DOKANIA]

1. If the seller gives me Credit Note with GSt on account of incentive then it will reduce my ITC. Henceforth, the Incentive shown in my books as Indirect Income will not form part of turnover as per GST Law??

2. If the seller gives me Financial Credit Note without GST being charged as an incentive then will it lead to increase in my tax liability thus forming part of my turnover??

[KUNAL DESAI]

Dear Naman,

Your question does not seems to be clear. Please elaborate with an example to get the right views.

[PAWAN KUMAR]

Inhttps://www.taxtmi.com/forms?id=1204r. Even impact of ITC in GSTR-3B in case of credit note with gst amount.

[KASTURI SETHI]

I support the views of Sh.Pawan Kumar Ji.

[NAMAN DOKANIA]

Pawan Kumar & Kasturi Sethi Sir

That means, in case of financial credit note issued in respect of Incentive even though appearing in my indirect income i.e credit side of PL A/c wont be taxable under GST??

[PAWAN KUMAR]

In gst both the credit notes with gst or without gst can be issued. But in both the cases issuance of credit note is cast upon supplier.

It will be impacted in the p& l of supplier not in the p&l of recipient. Recipient has to make provision in purchases as per my view.

[Ganeshan Kalyani]

The credit note is linked with the main supply. The main supply in you case, as a buyer, is purchase. So the credit note will reduce your purchases by the basic amount in credit note. The GST in credit note will reduce your ITC. If credit note is without GST then ITC will not be impacted. One may also treat the credit note given for incentive as a separate transaction and account it in the credit side of the P&L as an income. This is not a supply in any way.

Secondly, the impact of credit note in the turnover is on seller part. Credit note corresponds to outward supply which is nothing but turnover. So, as a buyer the credit note has no role in either increasing or decreasing your turnover/sales.

[KASTURI SETHI]

Dear Sh.Ganeshan Kalyani Ji,

Your reply is comprehensive and crystal clear. The querist will not have even an iota of doubt now.

[CSSANJAY MALHOTRA]

I fully endorse the views of Sh. Ganeshan ji.

[Ganeshan Kalyani]

Thanks Sri Kasturi Sir and Sri Sanjay Sir.

[janakiram kota]

Does the sitiuation changes if it were to be discounts? Then what about the reversal of input tax credit

AI Summary

Credit note treatment under GST: GST-bearing credit notes adjust supplier turnover and require recipient ITC reversal where applicable.
A credit note with GST reduces the supplier's outward supplies and requires the recipient to adjust Input Tax Credit; the GST component reduces recipient ITC while the basic amount reduces purchase cost. A financial credit note without GST, treated as an incentive or discount, does not directly affect recipient ITC and is not a supply, but the supplier must adjust turnover and output tax accordingly.