Vat

Trade discount is given accourding to your general trade practice. so, It is generally provided at same rate to all client or a particular class of client like to dealers etc.

Cash disount is provided on early payment of debt by purchaser if terms of your business provide.

Invoice is issued at the time of sale while payment of cash discount depends on date of payment of due against invoice by debtor. hence there is no possibility of such alterations in invoice or incidence of evasion of tax.

But mam my question is not about alteration in invoice.

Assume i am a distributor of X company, i purchase goods on VAT from X Co. and sell to Retailers. I also bear the expenses of X Co. like promotion of their goods which will be reimbursed from X Company.

Now when X Co. is raising invoice it will give me hefty trade discounts there by charging less VAT.

So here my expenses are getting reimbursed from X Company in the form of Trade Discounts and also reducing the VAT amount.

Please note that reimbursement of expenses is different from trade discount.

X co will give you trade discount in invoice as per its general pratice and terms and conditions finalised while you entered into distribution contract with them. They cannot reduce reimburesment of expenses or other cash discount as trade discount. Hence charging lower VAT question does not arises at all.