TaxTMI 
TaxTMI 
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?
Treatment of credit notes received without GST
29 Sep 2021 
4 Replies 
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Post sale discount eligibility: only pre established, invoice linked discounts can reduce GST liability; otherwise give discount without tax impact.
To deduct a post supply discount from taxable value the supplier must meet all limbs of Section 15(3)(b): a discount established by agreement at or before supply, specifically linked to invoices, and reversal of attributable ITC by the recipient on supplier documentation. Absent such agreement the supplier cannot reduce output tax; if a credit note reduces supplier tax (issued with GST) the recipient must reverse proportionate ITC, whereas a credit note without tax adjustment does not require ITC reversal. (AI Summary)
To deduct a post supply discount from taxable value the supplier must meet all limbs of Section 15(3)(b): a discount established by agreement at or before supply, specifically linked to invoices, and reversal of attributable ITC by the recipient on supplier documentation. Absent such agreement the supplier cannot reduce output tax; if a credit note reduces supplier tax (issued with GST) the recipient must reverse proportionate ITC, whereas a credit note without tax adjustment does not require ITC reversal. (AI Summary)