credit note

Target based discounts are generally given on periodic basis say monthly, quaterly, yearly. The details of such discounts are informed to all the customers before supply.

The supplier can issue credit note with respect to such discounts. Generally the credit note under GST is issued to reduce the output tax liability by the supplier. The credit note shall have reference to the original tax invoice. In the present case the credit would be pertaining to multiple tax invoices. 

As per law one credit note can be issued for multiple tax invoices. However, as per GSTN portal, one credit can have reference to one tax invoice. Therefore, supplier has to issue one credit note for each tax invoice which is not practically feasible.

Hence, the supplier can take a call whether to

(a) issue credit note along with GST for each invoice separately or

(b) issue commercial credit note without GST (no reduction in output tax liability for the supplier) - This option may lead to some litigations.

As per section 15(3) of the CGST act, such discount is allowed to be deducted from the transaction value if it is in accordance with the agreement.

credit note is to be issued as per section 34 of the CGST Act, 2017

and it will be reduced from the output tax liability, provided the receipient has reversed the ITC

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