56th GST Council Recommends to Amend Post-Sale Discount Provisions: S. 15(3)(b)(i) to be Omitted, To Rescinds CBIC Circular
The GST Circular dated June 26, 2024, which had previously given suppliers a way to fulfill the requirements of Section 15(3)(b)(ii), has been proposed to be revoked by the Council
GST Council Meeting
GST Council Meeting
The 56th GST ( Goods and Services Tax ) Council meeting has recommended amendments to the Central Goods and Services Tax (CGST) Act, 2017 with regards to the treatment of post-sale discounts.
Currently, Section 15(3)(b)(i) of the CGST Act requires that for post-sale discounts to be excluded from the transaction value, the discount must be established under an agreement made before or at the time of supply, and it must be specifically linked to the relevant invoice.
The Council has now suggested removing this restrictive condition of previous agreements and invoice connection by omitting Section 15(3)(b)(i).
Further, the Council has proposed to amend Section 15(3)(b) to specifically provide that such post-sale discounts should be granted only through a credit note issued under Section 34 of the CGST Act.
A corresponding amendment to Section 34 has also been suggested in order to fully implement this, to assure that when a GST credit note is issued, the recipient is automatically required to reverse the proportionate Input Tax Credit (ITC) in situations where the discount has decreased the value of the supply.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
Additionally, the GST Circular No.212/6/2024-GST dated June 26, 2024, which had previously given suppliers a way to fulfill the requirements of Section 15(3)(b)(ii), has been proposed to be revoked by the Council.. The withdrawal of this circular is intended to reduce duplicity, given the statutory amendments now being proposed.
To reduce ambiguity and litigation, the Council has also proposed issuance of a clarificatory circular addressing specific issues related to post-sale discounts, including:
- non-reversal of Input Tax Credit on account of post-sale discount through financial/commercial credit note;
- treatment of the post-sale discount provided by manufacturer to the dealer as additional consideration, in the transaction between dealer and end-customer;
- treatment of post-sale discount as consideration lieu of promotional activities etc. performed by the dealer.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
