GST Levy on Cash Discount(CD)

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This query is : Resolved

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This discussion addresses the Goods and Services Tax (GST) implications when offering cash discounts. The core issue is how to account for discounts offered after an invoice has been issued, particularly when the discount wasn't initially stated on the invoice. It explores whether a credit note is required and its GST impact, concluding that GST is generally not applicable to cash discounts and a credit note can be raised without GST. The best practice for accounting for the discount is also discussed.

Sanchit

Sanchit (Querist)
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25 March 2022 Dear Sir,
We have raised some invoices to few Parties on one condition that on receiving the Invoice & Material, they will make the payment after deduction of Cash Discount.
But this Condition was not disclosed in the invoices raised to the above parties.
Now, I want to know for Balancing the Ledger of such parties i need to raise Credit Note but What
will be the GST Implications on such Credit Notes.
I have elaborated my query with example - Suppose we have raise a Invoice of Rs. 20,00,000/- (Incl. of Tax) to a party and such party made a payment of Rs. 19,60,000/- after deducting Cash Discount of Rs. 40,000/- now Rs. 40000/- in our books is still outstanding
Now i want to know ,
i) Can we raise Credit note of Rs. 40000/-(Incl. of GST) & whether Customer need to reverse the GST Amount on Rs. 40000/-
ii) Any other option like Discount & GST implication on such Discount.