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Trade and Cash Discounts on GST – Applicability and Invoice

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cash and trade discounts on GST in Inida

Offering different discounts like cash discount, trade discount, volume discount, rate discount and so on is the an integral part of the deal advancement activities now a days. Under GST law cash discount, trade discount, volume discount, rate discount and so on are not bifurcated. In any case, under GST, discount arrangements are bifurcated under after two criteria;

1. Discount offered previously or at the season of supply and

2. Discount offered after the supply has been affected. In this article, we take a gander at the materialness of GST on discounts and strategy for invoicing.

Section 15 of GST Act 

Section 15 of the CGST Act, 2017, manages the arrangements of discounts under GST, the same has been duplicated hereunder for reference reason:

The estimation of the supply might exclude any discount which is given: 

Previously or at the season of the supply if such discount has been properly recorded in the receipt issued in regard of such supply; and

After the supply has been affected, if – 

Such discount is set up as far as an understanding went into at or before the season of such supply and particularly connected to applicable solicitations, and

Info tax credit as is owing to the discount based on record issued by the provider has been turned around by the beneficiary of the supply.

Based on the above arrangements of Section 15, it is entirely evident that discounts are bifurcated in two classifications i.e. discounts offered previously or at the season of supply and discounts offered after the supply has been affected.

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Discounts at Time of Supply 

Discount offered previously or at the season of the supply or at time of receipt, will be permitted as reasoning, from the estimation of the supply, if the same is independently recorded in the receipt.

EXAMPLE

Assume organization offered discount @10% on offers of INR 10,000/ – .

Discount sum would be INR 1,000/ – .

In the event that such discount sum is reflected in the tax receipt than such discount would be permitted as derivation. Estimation of supply INR 10,000 (- ) Discount INR 1,000.

Henceforth, net estimation of supply on which GST is payable is INR 9,000. In this way, when discount is said in the receipt and installment isn’t gathered, GST on discount sum would not be material.

Discount Offered After Supply 

At times, a discount could be offered by a provider after offer of the merchandise or administrations to enhance accumulations or client unwaveringness. In such cases, the estimation of supply at the season of invoicing would not have incorporated the discount. In such cases, GST on discount would not be relevant just if the accompanying conditions are fulfilled:

  • There is a composed understanding between the provider and the collector, at or before the season of supply. 

For instance, an understanding that if the client paid the sum due inside 30 days, a discount of 10% would be material.

  • Discount offered ought to be particularly connected to the important receipt. 
  • Info tax credit as is owing to the discount based on archive issued by the provider has been turned around by the beneficiary of the supply.
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