Reversal of VAT

This query is : Resolved

Guest

Guest (Querist)

24 February 2011 Hello,

Under MVAT Invoice is made giving effect to the Cash Discount, however later CD is reversed so will there be effect on Reversal of VAT?

Expecting the reply

Rita Paryani

CMA Nishad Patkar

CMA Nishad Patkar (Expert)
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25 February 2011 Dear Rita,

Yes, You need to reverse the Vat, as CD becomes a part of your selling price after reversal.

Nishad

Guest

Guest (Querist)

25 February 2011 Thanks Nishad.

Another query for the same is - Do Cash Coupons inside the Product has VAT effect on claiming the same??

Regards
Rita

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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22 July 2025 Hi Rita!

Regarding your queries:

1. Reversal of VAT when Cash Discount (CD) is reversed:
When you originally issued the MVAT invoice after deducting cash discount, VAT was calculated on the net invoice value (selling price minus CD).

If later the cash discount is reversed (i.e., the discount is not allowed), then the full selling price effectively becomes the taxable value.

Therefore, you must reverse the VAT credit on the discounted amount and pay VAT on the amount of cash discount reversed.

This is because VAT is charged on the actual consideration received or receivable, and once CD is reversed, the taxable value increases accordingly.

2. Effect of Cash Coupons inside the Product on VAT:
Cash coupons given to customers can impact VAT depending on their nature.

If the cash coupons reduce the effective selling price, the VAT should be charged on the net amount after coupon redemption.

If the coupons are not accounted for separately or considered as a discount, VAT is charged on the gross selling price.

Some states treat coupons as taxable supplies themselves, or vouchers needing specific accounting.

So, whether VAT applies on coupons depends on the terms and how they are accounted for.

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