After purchase of goods from manufacturer cash back of say Rs 1.0 lakh as discount was credited to our account. Do we have to reverse ITC for that amount or not.
Replies (10)
Quick Summary
This discussion clarifies whether Input Tax Credit (ITC) needs to be reversed when a discount is received after the supply of goods. The consensus is that if the discount, like 'pricing support' for tractor purchases, is pre-agreed and linked to specific invoices, ITC must be reversed. This differs from general promotional discounts, which may not require reversal.
ITC NEED TO BE REVERSE IF : in term of Section 15(3) of CGST , such Discount which are given after the supply & such Discount is established in term of an agreement entered into at or before the time supply & Specifically linked to relevant invoices.
Hence if the amount 1lac reced by you can linked to invoices & the agreement for such discount is made before the supply then ITC need to be reversed.