CBIC Issues Clarification on GST Treatment of Secondary & Post-Sale Discounts [Read Circular]

The Central Board of Indirect Taxes and Customs (CBIC), under the Ministry of Finance, issued Circular No. 251/08/2025-GST dated 12th September 2025. This circular provides much-needed clarity on how secondary or post-sale discounts should be treated under the Central Goods and Services Tax (CGST) Act, 2017. The clarification comes after the department received several queries from businesses and trade bodies about the GST implications of such discounts.

What are post-sale discounts?

Post-sale or secondary discounts are price reductions that manufacturers sometimes give to their dealers or distributors after the original sale has already taken place. For example, a manufacturer might sell goods to a dealer at a fixed price but later, due to market conditions or promotional strategies, offer a discount to help the dealer sell the goods at a lower rate to customers.

Clarifications in the Circular

1. Whether the full Input Tax Credit (ITC) is available to the recipient of supply when the recipient makes discounted payments to the supplier of goods on account of financial/commercial credit notes issued by the said supplier?

Answer: Yes, the recipient can avail full ITC of the tax charged in the original tax invoice.

• As per Section 16(1) of the CGST Act, 2017, every registered person is entitled to take credit of the input tax charged on supplies used in the course or furtherance of business.
• CBIC clarified that when a supplier issues a financial/commercial credit note (not under Section 34 of the CGST Act), the supplier cannot reduce his original tax liability.
• Since the tax charged on the original invoice remains unchanged, the recipient is not required to reverse any ITC corresponding to the discount.

2. Whether a post-sale discount offered by a manufacturer to its dealer/distributor would be treated as a consideration paid by the manufacturer for the dealer’s supply of the same goods to the end customer, as a monetary value of inducement?

Answer: No, such post-sale discounts are not treated as consideration for a service.

• Under Section 2(31) of the CGST Act, 2017, “consideration” includes any payment made for the inducement of supply of goods or services. However, when a manufacturer sells goods to a dealer, the dealer becomes the owner of those goods and later sells them to the end customer on a principal-to-principal basis.
• If the manufacturer gives a post-sale discount to the dealer (to help them sell at a competitive price, for example), this only reduces the sale price of the goods.
• It is not linked to any independent service rendered by the dealer to the manufacturer.
• Therefore, such post-sale discounts cannot be treated as consideration for the dealer’s supply of goods to the end customer.

3. Whether a post-sale discount extended by the manufacturer to the dealer can be treated as a consideration in lieu of the activities performed to promote the sale of the goods?

Answer: In general, no.

• When dealers receive post-sale discounts, they may undertake activities (like offering lower prices to customers) that help boost their own sales.
• Since the dealer already owns the goods (purchased from the manufacturer on a principal-to-principal basis), these activities benefit the dealer’s own business, not the manufacturer.
• In such cases, the discount is merely a reduction in the sale price of goods and cannot be treated as consideration for a separate supply of services. Hence, no GST is payable on such discounts.

Exception – Yes, if linked to specific promotional services.

• If the manufacturer and dealer have an agreement where the dealer is required to carry out specific promotional or marketing activities (e.g., advertising campaigns, co-branding, special sales drives, customer support services), and the discount/payment is clearly linked to those activities, then it becomes consideration for a separate service.
• In such cases, the dealer is providing a distinct supply of services to the manufacturer, and GST will be applicable on the value of that service

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