GST on Post Sale discount under sec.15(3)(b) are satisfied

[Nimesh Desai]

Hi, by reading few of the articles what we understood is for post-sale discount via credit note if section 15(3)(b) are satisfied GST may be applied on the credit note. but my question is can we raise/issue a financial/commercial credit note in this case, as there will be no GST loss to be department. 

[Sadanand Bulbule]

 It is worth to refer CBIC Circular No. 212/6/2024-GST dated 26/06/2024.

[KASTURI SETHI]

Yes. Credit Note without tax can be issued as per Section 34(1) of CGST Act. Also see case law:

Brown Craft Industries Ltd. - 2006 (11) TMI 85 - CESTAT, MUMBAI It is suppliers discretion.

[KASTURI SETHI]

2006 (11) TMI 85 - CESTAT, MUMBAI -  Brown Craft Industries Ltd.

2008 (2) TMI 189 - CESTAT, MUMBAI -  ACS HYDRAULICS PVT. LTD.

Although the above case laws pertain to pre-GST era, yet these are very useful to understand the issue and can be relied upon while filing reply. 

 

 

 

[Amit Agrawal]

If conditions under section 15(3)(b) are satisfied, it is better to issue credit-note with gst u/s 34. This is because once conditions under section 15(3)(b) are satisfied, value of your supply does not include your given discount. 

You may still issue financial / commercial credit note, if recipient does not want to reverse ITC and you do not want to take re-credit of ITC. But, there may be a possibility of legal dispute at recipient-end for ITC availed against "discount" despite satisfaction of section 15(3)(b) (i.e. except not-reversal of ITC at end of recipient). 

However, such issuance of "financial / commercial credit note without GST" (instead of credit note u/s 34 with gst) should NOT be used as mechanism to transfer hugely-accumulated ITC from end of supplier to recipient through deliberate planning / business structuring. 

These are ex facie views of mine and the same should not be construed as professional advice / suggestion or recommendation.

[Shilpi Jain]

Issuance of GST credit note is not mandatory. One could also choose to issue a financial credit note as rightly pointed out, government has receieved it share of taxes of which credit has been taken.

AI Summary

Post-Sale Discounts Under Section 15(3)(b) GST Exclude Discount from Supply Value; Credit Note Issuance Guidelines When post-sale discounts meet the conditions under section 15(3)(b) of the GST law, the value of supply excludes the discount, and GST may be adjusted accordingly through a credit note issued under section 34. Issuing a GST credit note is advisable to reflect this adjustment, but it is not mandatory; a financial or commercial credit note without GST can be issued if the recipient does not reverse input tax credit (ITC) and the supplier does not reclaim ITC. However, issuing non-GST credit notes should not be used to manipulate ITC transfers between parties. Relevant case law from the pre-GST era supports supplier discretion in issuing credit notes without tax. The government's share of tax is considered received once conditions are met, so adjustments primarily affect accounting between supplier and recipient rather than tax liability.