Whether closing stock be adjusted for Target Incentive Discounts received from suppliers and GST Treatment

[PANKAJ MASKARA]

Can Target Incentive Discounts received from suppliers be reduced from the value of closing stock? What is the correct GST treatment for such discounts?

Also, if the discount is not adjusted, it result in overstated profit because the Unsold closing stock is shown at a higher value.

AI Summary

Target incentive discounts: reduce inventory cost when attributable and permit GST value reduction only if ITC is proportionately reversed.
Target incentive discounts linked to purchases should reduce purchase cost and proportionately decrease closing stock when attributable to unsold goods. Under GST, post supply discounts can reduce taxable value only if they are established by a pre existing agreement, linked to specific supplies, and the recipient reverses the corresponding Input Tax Credit; suppliers must issue credit notes and proof of ITC reversal is required for reduction of output tax. Administrative guidance permits alternate evidence where portal matching is unavailable; absent compliance or reversal proof, GST adjustment is not allowed though accounting adjustment for inventory remains appropriate.