GST Urgent query

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This discussion clarifies the GST treatment of cash discounts. If a discount is agreed upon at the time of supply, GST is generally not reversed, even if a credit note without a GST amount is issued. However, discounts offered after the supply are subject to specific conditions, including prior agreement and potential GST reversal by the recipient to reduce the supplier's GST liability.

CA Parul Saxena

CA Parul Saxena (Querist)

03 July 2020 GST on cash discount to be reversed??

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

03 July 2020 Reverse if such discount agreed at the time of supply and credit note with GST given.
There will be no differentiation in GST between trade and cash discounts. In fact, GST segregates the discounts allowed into two categories:

Those given before or at the time of supply, and
Those given after the time of supply.

Discount allowed after the supply, it may or may not be added in the value of the supply, depending upon following:

The discount has been allowed as per the terms already agreed upon before or at the time of supply, or
The discount can be linked directly to the invoice of supply,
The input tax credit (ITC) related to the amount of the discount allowed has been reversed by the recipient of the supply.
Hence, the intent or commercial arrangement between the supplier and buyer would decide whether the discount in relation to any supply could reduce the GST liability of the supplier to the extent of such discount. If post supply discounts were not anticipated at the time of supply, it is not allowed to be deducted from value.

CA Parul Saxena

CA Parul Saxena (Querist)

04 July 2020 Credit notes provided by Vendor doesnt mention GST amount simple Discount amount is mentioned.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

04 July 2020 No reversal required in such a case.

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