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FCN ( Financial Credit Notes) Treatement in Books of Accounts

ITC / Input 366 views 2 replies

A receives material at Rs. 1000 + GST from B with proper invoice.
A knows that if he sold the material in bulk he will receive discount in the form Financial Credit Note of 10 percent (without GST) of transaction value from B, which cost him the product to Rs. 882.
A sold the product at a price of Rs. 950 + GST.

Assuming the GST at 18% perecent follwing transaction take place in books of accounts

Purchase Acc Dr. 1000
Purchase Acc Cr. 118

Net Purchase Acc Dr. 882

Sales Acc Cr. 950

GP 68

GST Balance Dr. 9

Is it right or any GST liability will arise  ????

Replies (2)
Quick Summary
Financial Credit Notes (post-sale discounts) don't impact GST if no tax adjustment is made by the supplier. GST applies on original value; ITC remains intact. No extra GST liability arises-only accounting profit is affected.

The CBIC clarified in Circular No. 92/11/2019-GST that secondary discounts (post-sale) can be issued via financial credit notes without any GST reversal required by the recipient, as long as the supplier doesn't reduce their own tax liability.

GST is payable on the original transaction value.
The financial credit note without GST does not affect GST liability or ITC.

Output GST = 171
Input GST = 180
Net ITC credit = Rs. 9

No additional GST liability arises.

Wheelie Life


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