Treatment of credit notes received without GST

[Syamaprasad Menon]

We regularly receive credit notes from our principals for passing down to our dealers as post-sale discounts to them. We hold no contract/agreement either with the dealers or our principals . Therefore, we treat these credit notes to us as post-purchase discounts (credit note amount *100/100+rate of GST) and reverse the corresponding ITC involved. We issue credit notes to our dealers capturing the corresponding GST and report the same in our GSTR-1. Is this in order?

AI Summary

Handling Post-Sale Discounts: Predetermined Agreements Needed for GST Deduction; No ITC Reversal if Credit Notes Exclude GST A discussion on the treatment of credit notes without GST involves a query about handling post-sale discounts received from principals and passed to dealers. The issue revolves around whether these discounts, lacking prior agreements, should affect GST calculations. The response clarifies that discounts must be predetermined to qualify for GST deduction. If not, the supplier cannot reduce output tax liability, and no ITC reversal is needed unless credit notes include GST. The advice is to ensure compliance to avoid revenue loss and pay taxes with interest if necessary.