S. Hariharan & Associates

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Discounts like trade discount, quantity discount etc. are part of the normal trade and commerce. This article is on the effect of GST on Discounts.

December 10, 2017

Transaction Value

Taxable value is the transaction value i.e. price actually paid or payable, provided the supplier and the recipient are not related and price is the sole consideration.

In most of the cases of normal trade, the invoice value will be the taxable value.

However, to determine value of certain specific transactions, Determination of Value of Supply rules have been prescribed in CGST Rules, 2017.

Whether Discounts to be excluded from Transaction Value

There are two situations which are detailed below:-

Discounts

Pre-supply Post-supply

Pre-supply discounts

Discounts shown at the time of raising invoice is allowable to be excluded while determining the taxable value and the GST will be on value of goods less discount.

Post-supply discounts

Discounts given after the supply can also be excluded while determining the taxable value, provided two conditions are met, namely:

discount is established in terms of a pre supply agreement between the supplier and the recipient and such discount is linked to relevant invoices and

input tax credit attributable to the discounts is reversed by the recipient

A word of caution

Since discount being an independent transaction, it could result in levy of GST on the discount, treating it as a service.

The author is an associate member of the Institute of Chartered Accountants of India and a practising Chartered Accountant based in Papanasam and can be reached at vijaysarathisha@gmail.com.

: The contents of this document are solely for informational purpose. It does not constitute any professional advice or a formal recommendation. The author does not accept any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document or for any actions taken in reliance thereon. No part of this document should be distributed or copied without express written permission of the author.