credit note- Trade discount adjustment

This query is : Resolved

vasanthbabu (Querist)
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28 January 2009 I am selling our finished product to one of My customers say ABC for example

Value of goods Rs.1,00,000/-
VAT @4% Rs. 4,000/-
Total invoice value Rs.1,04,000/-

Subsequently I am issuing credit note towards Trade Discount to the
customer i.e ABC as per the following

Trade Discount Rs.20,000/-
VAT @4% Rs. 800/-
Total credit Note value Rs.20,800/-

Now, I have to pay VAT on my above sales to the department as follows:-

Value of Goods (Net value after deducting Trade Discount) Rs.80,000/-
Add: VAT @4% (after adjusting VAT on Trade Discount) Rs. 3,200/-

Therefore, total tax payable to the goverment towards VAT Rs.3,200/-

Now, I would like to get clarification from you that, whether our above
transaction is correct under VAT Rules? Whether it is correct to pay vat
to the government Rs.3,200/- or I have to pay Rs.4,000/-?
Regards

V.Vasanth Babu

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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28 January 2009 Yes what you are doing is correct.

Trade discount is allowed as a deduction from sales and on net sales you should pay the tax.

If you are raising through credit note please note that the reduction can be claimed only in the month of credit note.

You can net when sale bill and credit note are in the same month.

If credit note is in the next month you can reduce it from any other sale of that month.

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