Treatment of Discounts under GST

By | March 14, 2017
(Last Updated On: March 14, 2017)

Query: What would be treatment of supply discount in calculation of Transaction Value under GST Law?

Answer: According to Section 15 (3) – Value of taxable supply  of Revised Model GST Law [ Nov 2016]  –

Discounts can be classified into two parts

Discounts given before Supply – Discounts given before or at the time of the supply shall not be included in Value of Supply provided such discount has been duly recorded in the invoice issued in respect of such supply;

Discounts given After Supply : Discounts given after supply shall not be included in Value of Supply provided

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) input tax credit has been reversed by the recipient of the supply as is attributable to the discount on the basis of document issued by the supplier.

Relevant Extract of Section 15 of Revised Model GST Law [ Nov 2016]  –

Section 15 Value of taxable supply :-

(3) The value of the supply shall not include any discount that is given:

(a) before or at the time of the supply provided such discount has been duly recorded in the invoice issued in respect of such supply; and

(b) after the supply has been effected, provided that:

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) input tax credit has been reversed by the recipient of the supply as is attributable to the discount on the basis of document issued by the supplier.

 

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