In this post, we have completely summarised section 15(3) of the Central Goods and Service Tax Act 2017 which is concerned with the treatment of discounts under GST.
Below, we discussed the various aspects of the supplied value which is not considered for the discount, and also understand section 15 (3) for a better perspective:
The supplied value would not consist of any discount which is mentioned below:
- Before or during the time of supply when these discounts pose duly recorded in the generated e-invoice provided for these supplies.
- Post to the supply would be affected, if
- This discount is made towards the agreement made into that or before the time of the supply and associated with the related invoices,
- ITC is a cause for the discount because the document provided by the supplier would get reversed through the recipient of the supply.
Full Details of GST – Section 15 (3)
The amount of the discount must be lessened from the supply value if:
- Discount is permitted at or before the time of supply and the amount of the discount is provided on the invoice.
- The discount is permitted the post to the supply gets affected:
- The discount is provided for the agreement that existed during the time of the supply and every invoice raised earlier was discounted.
- The recipient (Purchaser) has reversed the ITC’s claim that is attributable to a discount (such discounts are given by the supplier through credit notes and the Purchaser, by considering those credit notes in GSTR-3B Forms, reverses the ITC).
Some Examples of Discounts Under CGST Section 15(3)(b)
- Buy More Save More – E.g.- Get a 10 % discount for purchases above Rs. 5000/-, 20% discount for purchases above Rs. 10000/- etc.
- Periodic/Year ending Discount – E.g. – Get more discount of 1% if you purchase 10000 pieces in a year, get more discount of 2% if you buy 15000 pieces in a year, etc.
Under the CBIC GST Circular No. 92/11/2019
- It is clarified that financial/commercial credit notes would be given through the supplier if the conditions cited in clause (b) of section 15(3) of the said Act are not met (Credit notes can be issued as a commercial transaction between the two contracting parties).
- According to para 2D(v), the Value of supply would not be lessened by the discount i.e. given by the seller through the method of the financial/commercial credit notes.
- Another discount issued to the buyer during the time of the invoice payment, would not be limited during finding out the supply value as this discount is not identified during the supply time.
- As no GST is levied on these commercial/financial credit notes, these kinds of discounts might be acknowledged as non-GST supply.
- Example: X purchases goods amounting to Rs. 1,00,000/- along with 18,000 GST from Y(Seller) in the FY 2021-22. And X has made the payment to Y Rs. 1,18,000/-. Afterwards, Y(Seller) has filed his GSTR-1 Form and X(Buyer) gets the ITC of Rs. 18,000.
Now in FY 2022-23, Y(Seller) gives a volume discount (that does not meet the condition of section 15(3)(b)) to X(Buyer) towards the purchases incurred in FY 2021-22.
Passing on this type of discount that does not satisfy the conditions of section 15(3)(b) Y(seller) might provide the financial/commercial credit notes to the X(buyer) and not levy the GST on the same credit notes since the same does not diminish the supply value.
Also, X (purchaser) does need not to reverse the input tax credit on the same financial/commercial credit notes.
