ABC ltd manufactures juices. He appoints Mr. X, a dealer to sale juices through its own shop and transferred stock of MRP 150000/-. It allows 5% discount to Mr. X on MRP.

In the month of January due to uncertain conditions the stock of Rs. 90000 remains unsold and expiry date of juices is about to come. So, ABC ltd offered additional discount of 10% to Mr. X as an incentive to clear the stock. Determine the treatment of both discounts under GST ?


As per section 15 of CGST Act The value of the supply shall not include any discount which is given''
    a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
    b) after the supply has been effected, if'
        (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
        (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

In view of above section discount of 5% will not be included in the value of supply as it was given at the time of supply.

However in case of additional discount, both the conditions given above are not satisfied as it was given after supply of goods as well as there was no agreement entered into before supply of goods, therefore it will form part of taxable value.

Further additional discount received is considered as consideration received for providing service as per Schedule II clause 5(e) i.e. agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act.

Mr. X is required to issue invoice as per section 31 to ABC Bakers for the incentive received in the form of additional discount and GST is charged at the applicable rate.