CBIC clarifies GST levy on post-sale discounts, to help reduce disputes, Pg 12.

Key Highlights:

• The CBIC clarified that post-sale discounts from manufacturers to dealers to boost sales will not attract GST.
• GST will be levied if dealers undertake sales promotional activities as part of an agreement with the manufacturer.
• Buyers are not required to reverse the input tax credit (ITC) when they make discounted payments to the supplier.
• The clarification aims to provide certainty and reduce legal disputes related to GST on discounts.

Detailed Insights:

• The CBIC clarification distinguishes between routine trade discounts and arrangements where manufacturers have agreements with end-customers.
• Post-sale discounts are not taxable as services unless the dealer is contractually bound to perform defined promotional activities.
• The supplier of goods can issue financial or commercial credit notes, and the seller won’t be eligible to reduce the original tax liability.
• The clarification was issued via a circular dated September 12 to all central tax principal chief commissioners and chief commissioners across the country.
• Businesses need to carefully document agreements, credit notes, and customer-level pricing arrangements.
• Section 16 (1) of the CGST Act, 2017 allows registered persons to take credit of input tax charged on any supply of goods or services used in their business.

Key Concepts Involved:

• GST (Goods and Services Tax): An indirect tax levied on the supply of goods and services.
• Input Tax Credit (ITC): Deduction of the tax paid on inputs from the overall GST liability on output.
• CBIC (Central Board of Indirect Taxes and Customs): The apex body for indirect taxes in India.