Post supply discount/
incentive
Introduction
A
supplier of goods or services or both is mandatorily required to issue a tax
invoice.However during the course of trade or commerce after the invoice has
been issued there could be situations like:
•
The supplier has erroneously declared a value which is more than the actual
value of the goods or services provided.
•
The supplier has erroneously declared a higher tax rate than what is applicable
for the kind of the goods or services or both supplied.
•
The quantity received by the recipient is less than what has been declared in
the tax invoice.
•
The quality of the goods or services or both supplied is not to the
satisfaction of the recipient thereby necessitating a partial or total
reimbursement on the invoice value.
•
Any other similar reasons.
In
order to regularize these kinds of situations the supplier is allowed to issue
what is called as credit note to the recipient.
Once the credit
note has been issued the tax liability of the supplier will reduce.
As per valuation rule-Exclusion of
discounts like trade discount quantity discount etc. are part of the normal
trade and commerce. Therefore pre-supply discounts i.e. discounts recorded in
the invoice have been allowed to be excluded while determining the taxable
value.
Discounts
provided after the supply can also be excluded while
determining the taxable value provided two
conditions are met namely: (a) discount is established in terms of a
pre supply agreement between the supplier & the recipient and such discount
is linked to relevant invoices (b) input tax credit attributable to the
discounts is reversed by the recipient
FAQs on GST provided by CBEC/CBIC on
31st March 2017
CHAPTER -
VALUATION IN GST
Q 7. WHETHER POST-SUPPLY DISCOUNTS
OR INCENTIVES ARE TO BE INCLUDED IN THE TRANSACTION VALUE?
Yes. where the post-supply discount is established as
per the agreement which is known at or before the time of supply and where such
discount specifically linked to the relevant invoice and the recipient has
reversed input tax credit attributable to such discount the discount is
allowed as admissible deduction under Section 15 of the model GST law.
Q 8. WHETHER
PRE-SUPPLY DISCOUNTS ALLOWED BEFORE OR AT THE TIME OF SUPPLY ARE INCLUDIBLE IN
THE TRANSACTION VALUE?
No provided it is allowed in
the course of normal trade practice and has been duly recorded in the
invoice.
Format
There
is no prescribed format but credit note issued by a supplier must contain the following
particulars namely:
(a)
name address and Goods and Services Tax Identification Number of the supplier;
(b)
nature of the document;
(c)
a consecutive serial number not exceeding sixteen characters in one or
multiple series containing alphabets or numerals or special characters hyphen
or dash and slash symbolised as “-” and “/” respectively and any combination
thereof unique for a financial year;
(d)
date of issue;
(e)
name address and Goods and Services Tax Identification Number or Unique
Identity Number if registered of the recipient;
(f)
name and address of the recipient and the address of delivery along with the
name of State and its code if such recipient is un-registered;
(g)
serial number and date of the corresponding tax invoice or as the case may be
bill of supply;
(h)
value of taxable supply of goods or services rate of tax and the amount of the tax credited to the recipient;
and
(i)
signature or digital signature of the supplier or his authorized representative.