Question

Discounts are received by SUPPLIER OF GOODS from HIS VENDOR of Goods, based on the targets achived by the SUPPLIER by way of separate CREDIT NOTE FROM THE VENDOR. The said discounts are reflected in the tax invoice for supply of goods by the vendor. whether the above DISCOUNTS ARE SUBJECT TO GST?

Answer

There are following possibilities:

Case 1: Invoice of Rs 10000/- issued on 1st January. On 2nd March a credit note of discount is issued by the supplier.

In this case the supplier will mention credit note in his return. Accordingly the tax liability on Rs 1000/- will get reduced from the liability of March month. But for this the receiver has to reduce ITC on Rs 1000/-.

Case 2: The invoice of Rs 10000/- issued on 1st January. The next invoice is issued for Rs 10000/- in March. The supplier deducted discount of Rs 1000/- from the second invoice and charged tax on Rs 9000/- in month of March. No correction is required. The receiver will get credit on Rs 10000/- in January and on Rs 9000/- in March.

In first case the terms and conditions at the time of sale should contain the term related to Target discount. (Reply dt.11/09/2018)