Goa Finance Department Clarifies Correct Method for Recording Discounts in Tax Invoices under GVAT Act, 2005 [Read Circular]

The Department of Finance, Government of Goa, has issued a detailed Trade Circular (GVAT No. 01 of 2025-26) to clarify the treatment and presentation of discounts in tax invoices under the Goa Value Added Tax (GVAT) Act, 2005. The move comes in response to widespread discrepancies observed in the way dealers are currently calculating and reflecting discounts and VAT in their tax invoices.

The Trade and Tax Departments noted that several registered dealers were deducting trade discounts from the grand total of invoices after applying VAT on the full sale price. This practice, according to the circular, contradicts the statutory provisions of the GVAT Act and results in incorrect tax computation and complications in Input Tax Credit (ITC) claims by purchasing dealers.

Read More: [BREAKING] Income Tax Return: CBDT notifies Revised ITR Forms 1 and 4 [Read Notification]

To ensure uniformity and legal compliance, the Finance Department has issued the circular to all stakeholders including registered dealers, industry representatives, and assessing authorities.

E-Filing Mistakes Can Be Costly! Avoid penalties now - Click Here

Legal Interpretation of "Sale Price"

As defined under Section 2(ad) of the GVAT Act, the "sale price" is the amount of consideration after subtracting any cash or trade discounts that are normally allowed in the course of business. This excludes taxes like excise duty but includes all charges for goods until the point of delivery.

This means that VAT must be calculated only after discounts have been applied, not on the gross amount.

Correct vs Incorrect Methods: Explained

The circular includes two illustrative scenarios:

Tax Audit Deadline Is Near! Are you prepared? - Click Here

Correct Method (Illustration I):

• Basic sale price: Rs. 100
• Trade discount: Rs. 10
• Taxable value: Rs. 90
• VAT @ 22%: Rs. 19.80
• Total Invoice Value: Rs. 109.80

This approach ensures that VAT is charged only on the net sale price (Rs. 90), resulting in accurate tax liability and ITC eligibility.

Read More: Cloud Accounting: Best Software Tools for Indian SMEs & CAs

Incorrect Method (Illustration II):

• Basic sale price: Rs. 100
• VAT @ 22%: Rs. 22
• Discount applied post-tax: Rs. 10
• Total Invoice Value: Rs. 112

Here, VAT is charged on the full amount before applying the discount. As per the circular, this results in overstated VAT in the invoice and misrepresentation of the taxable value, making it non-compliant with the law.

One Wrong Entry = Big Trouble! Learn how to file it right - Click Here

Dealer and Departmental Responsibilities

• Dealers must ensure that discounts are deducted before VAT is applied in tax invoices.
• VAT must be charged on the net sale price only.
• Assessing authorities are advised to carefully review submitted documents, including VAT audit reports and financial statements, to identify any deviations or misclassifications.
• Any income recorded as “other receipts” should also be examined for possible inclusion in VAT turnover.

Read More: SEBI Notifies Second Amendment to Infrastructure Investment Trusts Regulations, 2025

Penalties for Non-Compliance

Failure to adhere to the correct methodology can lead to:

• Prosecution under Sections 45 and 58A of the GVAT Act.
• Penalties including a fine of up to Rs. 25,000, imprisonment up to six months, or both.

Advisory

The circular concludes with a reminder that registered dealers are expected to strictly follow all legal provisions of the GVAT Act, 2005, particularly Section 11, which governs tax invoice issuance. The circular is intended to facilitate compliance and reduce ambiguity, and not to serve as a legal interpretation in case of disputes.

Issued under the seal of the Commissioner of State Tax, Goa, the circular is now in effect and available for public reference through the Government Gazette and the official website.

To Read the full text of the Circular CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates