Treatment of incentives under GST law

[Rajat Gupta]

Hello experts,

A taxpayer receives multiple incentives in the form of discounts & promotional activity reimbursements from its supplier without charging GST. The amount of discounts/incentives is separately credited by the supplier through commercial credit notes. Although there is no written agreement for this, the supplier grants a discount based on the monthly purchases made by the taxpayer.

My query is whether the taxpayer needs to reverse GST on the incentive portion or not. If not, can the revenue treat this incentive as consideration received by the taxpayer for some support services to the supplier? 

AI Summary

GST treatment of post supply incentives: recipients need not reverse input tax credit where discounts were not predetermined.
Post supply commercial credit notes for discounts or promotional reimbursements that were not predetermined at or before supply do not meet the conditions for GST credit notes; therefore issuance of financial credit notes by the supplier does not obligate the recipient to reverse input tax credit. Incentives are distinct from discounts, and treating such reimbursements as taxable consideration for services by the recipient-absent an adjacent supply or pre agreement-contravenes the transaction value framework and recent administrative and judicial guidance.