DISCOUNT ON GST

[RAVI MUNDRA]

Dear Sir,

I have Purchased Some material @ 100 Rs Per Kg on 01/01/2025. At the time of Purchase I am aware that I will receive some discount but it was not fixed. I was aware i will receive discount of 6 Rs per kg but in next month I received discount of 8Rs per kg for the purchase made on 01/01/2025.

on 10/01/2025 i sold the same material @ 95 per kg.

Now Department is asking me to Reverse the input Credit taken on discount.

[VENU K]

There is no provision in GST law that can demand reversal of Input Tax in case of discount from recipient. The entire Section 15(3) relating to discounts is applicable only to the supplier and not the recipient.

The only possibility for department to take action against the recipient is to demand out put tax invoking this is a subside directly linked to price Sec 15(2)(e)

My understanding

[KASTURI SETHI]

Dear Querist,

You have mentioned that you were aware of the discount to be paid to you by the supplier. Any documentary evidence to the effect of your ''awareness'' i.e. prior known to the discount as required in terms of Section 15 (3) (b)(i) ?

So first issue involved is whether you are eligible post-sales promotion discount ?

Regarding the demand for reversal of ITC, read third proviso to Section 16 (2) below (d) carefully. On this very issue the department has issued SCN to the taxpayer in Chandigarh zone also.

[Shilpi Jain]

There should not be any requirement to reverse credit.

AI Summary

Input tax credit reversal may be contested where post-sale discount is received unless treated as a subsidy. Whether a recipient must reverse claimed Input Tax Credit when a supplier grants an additional discount after supply turns on how the discount is characterised and whether the recipient was aware of it at the time of supply. The discount rule targets the supplier's transaction value; post supply discounts do not automatically trigger ITC reversal, but a discount treated as a subsidy linked to price can lead to output tax demands and administrative notices. Documentary evidence of prior knowledge and the relevant ITC entitlement proviso are key compliance considerations.