TaxTMI 
TaxTMI 
TaxTMI 
Treatment of incentives under GST law
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....reatment of incentives under GST law<br> Query (Issue) Started By: - Rajat Gupta Dated:- 7-7-2025 Last Reply Date:- 10-7-2025 Goods and Services Tax - GST<br>Got 4 Replies<br>GST<br>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 b....
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....y 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?&n....
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....bsp; Reply By Ganeshan Kalyani: The Reply: In Sec. 34, the word "may" is been mentioned - indicating the applicability of GST credit note is optional. It is because its applicability is depended on certain conditions. The said conditions are prescribed u/s 15(3)(b) of CGST Act. The condition states that discount given post supply need to be predetermined at the time of entering into an agreement....
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.... or before the time of supply. In your case, as you have mentioned, that discount given by the supplier is not determined at the time of supply but it is given basis monthly purchases. Thus, the condition as prescribed u/s 15 is not satisfied and therefore the supplier has issued a financial credit note and NOT the GST credit note. Since, he has not issued GST credit note, you are not liable to r....
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....everse your ITC taken on the basis of invoice issued by the supplier. Reply By KASTURI SETHI: The Reply: (i) Perfectly clear reply by Sh. Ganeshan Kalyani, Sir. (ii) If discount received is with GST effect, then the receiver is required to reverse proportionate credit availed as is attributable to the discount received. When tax has not been paid. nor payable and ITC has not been taken, reversa....
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....l on what basis ? (iii) "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 ?" Ans. SCNs are being issued by the department by treating such discounts as income/consideration but this is not legally correct. Such SCN will not align w....
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....ith the definition of transaction value. As per legal dictionary ""Incentive and "discount" are different concepts. Do not intermingle incentive with discount. Reply By Rajat Gupta: The Reply: Thank you Ganeshan Sir and Kasturi Sir for clarifying the issue. One issue that persists is whether the commercial credit note, issued by the Company mentioning "promotional activity reimbursements", also....
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.... qualifies as a discount or incentive. There is no adjacent supply against that reimbursement made by the Company. Please clarify on this. Reply By Raam Srinivasan Swaminathan Kalpathi: The Reply: Kindly go through Circular 212 of 2024 and also recent Madras HC ruling in the case of Tvl.Shivam Steels (2024 (7) TMI 1202 - MADRAS HIGH COURT) wherein it was held that the Court said that the ....
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....assessing officer concluded that the taxable person is providing a service to the supplier while taking the benefit of a discount by facilitating an increase in the volume of sales of such supplier. This conclusion is ex facie erroneous and contrary to the fundamental tenets of GST law. Therefore, this conclusion warrants interference, and this issue requires re-consideration.... The Court set as....
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....ide the impugned order only insofar as defect no.3 relating to reversal of Input Tax Credit for the value of credit notes issued by the supplier is concerned.... <br> Discussion Forum - Knowledge Sharing ....