Vat on discount in invoice

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This query is : Resolved

PRANAY JAIN (Querist)

24 July 2013 IN UP VAT does we have to pay VAT on marginal discounts given in invoice.Supposing a discount of 250 on invoice of 45000.

CA Parul Saxena

CA Parul Saxena (Expert)

24 July 2013 VAT is computed after deducting trade discount but before cash discount.Example:-
Sale price............................100000
(-)Trade discount 10%..................10000
Net....................................90000
(+)Vat @ 5%.............................4500

(-)Cash discount @5% on Rs.90000........4500
net amount receivable..................90000

MJ Krishnamurthy

MJ Krishnamurthy (Expert)

14 August 2013 The net amount receivable or received is the taxable amount. Cash discount is not mentioned in the invoice.It may be mentioned in the invoice for encouraging prompt and early payment.Hence the value arrived after reducing trade discount only is to be taken for VAT calculation.Cash discount arises only at a later stage as an incentive for early payment.....mjk

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