GST on Post Sale Discount

[Murari Agrawal]

I have gone through most of the discussions on the subject on this forum. It is clear that discount can be reduced from the taxable value only if the conditions under sec.15(3)(b) are satisfied. For any post sale discount without previous agreement, Supplier has to issue financial credit note without GST.

My only question is whether the buyer will have to reverse the ITC to the tune of such post sale discount. This question arises in my mind due to following:

1) In 2019 (3) TMI 928 AAR, Tamilnadu (Re:MRF), it has been held that ITC has to be reversed for the amount not paid due to discount in the light of proviso to Sec.16

2) Circlular C.B.I.& C. No.92/11/2019 GST dated 07.03.2019, under Heading Secondary Discounts - clause (vi), says that there is no impact of availability or otherwise of ITC in the hands of Supplier. However, there is no mention whether or not it affects the recipient/buyer.

AI Summary

Examining GST Impact on Post-Sale Discounts: Section 15(3)(b) Compliance and Input Tax Credit Reversal Debate A discussion on the Goods and Services Tax (GST) implications of post-sale discounts highlights that a discount can reduce taxable value only if conditions under Section 15(3)(b) are met. If not, a financial credit note without GST is issued. The primary question is whether the buyer must reverse Input Tax Credit (ITC) when such a credit note is issued. Opinions vary: some argue reversal is necessary if conditions are unmet, while others cite rulings suggesting no ITC reversal is needed if the supplier's tax liability remains unchanged. The consensus leans towards no reversal if a financial credit note is issued without reducing the supplier's tax liability.