Clarifications on Treatment of Secondary or Post-Sales Discounts under GST
<p><span>The Government of India has issued clarifications on various doubts related to the treatment of secondary or post-sales discounts under GST. The key points from Circular No. 105/24/2019-GST are as follows:</span></p><ol start="1"><li><span><strong>Post-Sales Discounts Without Dealer Obligations</strong>:</span><ul><li><span>Post-sales discounts given by the supplier of goods to the dealer without any further obligation or action required by the dealer are not included in the value of supply. They are related to the original supply of goods and are exempt from GST if the provisions of sub-section (3) of section 15 of the CGST Act are fulfilled.</span></li></ul></li><li><span><strong>Post-Sales Incentives Requiring Dealer Actions</strong>:</span><ul><li><span>Additional discounts given by the supplier for special sales drives, advertisement campaigns, exhibitions, etc., are treated as consideration for the dealer's services. Dealers must charge GST on such additional discounts, and suppliers can claim input tax credit on the GST paid.</span></li></ul></li><li><span><strong>Special Reduced Prices to Customers</strong>:</span><ul><li><span>If additional discounts are provided by the supplier to the dealer to offer a reduced price to customers, these discounts represent consideration flowing from the supplier to the dealer for the supply to the customer. The additional discount amount must be added to the value of supply for GST purposes.</span></li></ul></li><li><span><strong>Financial/Commercial Credit Notes</strong>:</span><ul><li><span>Suppliers can issue financial/commercial credit notes for post-sales discounts not eligible for exclusion from the value of supply. Dealers are not required to reverse input tax credit for such discounts if they pay the reduced supply value plus the original tax amount charged.</span> <a href="https://cms.plasament.com/storage/circular-cgst-105.pdf">circular-cgst-105</a><br> </li></ul></li></ol>