Income tax on discount

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....ncome tax on discount<br> Query (Issue) Started By: - ranjit ronald Dated:- 3-10-2009 Last Reply Date:- 6-10-2009 Income Tax<br>Got 1 Reply<br>Income Tax<br>Dt.3.10.2009 Sir, We have appointed A as our stockists. We have sold our products to B through our stockists A. Payment by cheque is received from B and credited to A's a/c (stockists). Invoice is raised and goods dispatched to B (consignee) o....

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....n account of A stockists. In the sales ledger all the traansactions done through the account of A, the stockists. In the sales ledger there is no transactions of B the consignee. At the month end we are allowing Trade discount to A (stockist) on the basis on total offtake. The discount is credited to A's a/c (stockists) through credit note. In the sales tax monthly return the above transactions ar....

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....e recorded as sales to A (stockist) . Pl advice : 1. Whether the Discount paid to A attracts income tax. 2. B wants to avail VAT input tax credit against this transaction. Is it possible. If not please give remedial measures. RANJIT RONALD Reply By Rama Krishana: The Reply: There are two situations. If the sale and purchases are booked by A in that case, discount would be part of trading account.....

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.... But, if sale is made by the company on behalf of A, A would be entitled to get the commission. The issue is dependent on correct determination of nature of the transaction of sale and purchase. If A is booking sale and purchase, Invoice to B should be generated by A to B. In that the issue of Input Tax Credit would not be a major issue. But, in case, only discount / commission income is booked by....

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.... A and sale is directly made by you to B, You have to charge vat on full amount paid by B either to A or to you. Therefore, all is dependent on nature of transaction, how you book.<br> Discussion Forum - Knowledge Sharing ....