No GST is leviable on Cash Discounts received from Supplier: AAR [Read Order]

The Madhya Pradesh Authority of Advance Ruling (AAR) has ruled that no GST is leviable on Cash discounts received from the supplier.

The Applicant, Rajesh Kumar Gupta of M/S Mahveer Prasad Mohanlal is having the dealership of a famous rice brand name of India known as “India Gate Basmati Rice” since last more than 15 years. That for the purpose of brevity, the supplier of India Gate Basmati Rice to the applicant shall be called as “Supplier”.

The applicant has sought the advance ruling on the issue of whether the applicant can avail the Input Tax Credit of the full GST charged on invoice of the supply or a proportionate reversal of the same is required in case of post purchase Cash discount for early payment of supply invoices(bills) given by the supplier of goods to the applicant without adjustment of GST, and Incentive/schemes provided through credit note without adjustment of GST by the supplier to the applicant.

Yet another issue raised was whether GST is leviable on cash discount offered by supplier to applicant through credit note without adjustment of GST for making the early payment from the date stipulated for payment of such supply as output supply? If yes, then what is the applicable HSN and rate of GST and Whether GST is leviable on incentive/schemes provided through credit note without adjustment of GST by the supplier to the applicant (dealer) as output supply? If yes, then what is the applicable HSN and rate of GST.

The coram of Manoj Kumar Choubey and Virendra Kumar Jain held that the applicant can avail the Input Tax Credit of the full GST charged on the invoice of the supply and no proportionate reversal of ITC is required in respect of commercial credit note issued by supplier for Cash discount for early payment of supply invoices(bills) and Incentive/schemes provided without adjustment of GST, if the said discount is not covered under Section 15(3)(b) of CGST Act, 2017 and the said discounts is not in terms of prior agreement. This is subject to the conditions that the GST paid for the said goods/service is not reversed or reimbursed / re-credited by the supplier to the applicant in any manner.

“Since the amount received in the form of credit note is actually a discount and not a supply by the applicant to the supplier, no GST is leviable on receiver on cash discount/incentive/schemes offered by the supplier to applicant through credit note against supply without adjustment of GST,” the AAR said.

To Read the full text of the Order CLICK HERE

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