ABC Ltd. manufacturing concern registered in Delhi sells Air Conditioners through its distributors. MRP of Air Conditioner is Rs 50000/- but ABC Ltd. sells Air Conditioners at Rs 42000/- each to its distributors. It also charges Rs 1000/- each as freight charges and Rs 500/- each for packing charges.

The stock is dispatched to distributors on monthly basis on 25th date of preceeding month. The company offers discount of 10% on the price charged (exclusive of all expenses and taxes) for next month if distributors sells more than 50 Air Conditioners in the previous month.

The company appoints Mr X as distributor and dispatched 60 Air conditioners on 2nd April, 2018. Thereafter Mr X places an order for 80 Air Conditioners for the month of May and company dispatched the same along with invoice on 25th April 2018. Mr X has made the payment on 28th April 2018 and claimed ITC.

Mr X reports its sales of 55 Air conditioners for the month of April. Determine the taxable value of Air conditioners dispatched by ABC Ltd. for the month of May. GST on Air conditioner is 28%.


Taxable value of invoice for 80 Air Conditioners:

Price of Air conditioner    42,000
Add: Freight charges [section 15(2)(c)]      1,000
Add: Packing charges [section 15(2)(c)]         500
Value of 1 Air conditioner     43,500
Value of 80 Air conditioners 34,80,000

However, as per section 15(3) 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 the given case Mr X is entitled for discount for the month of May as he has sold more than 50 Air conditioners in April. But as the stock along with invoice is already dispatched in April, therefore it is post supply discount and shall not be included in the value of supply because this discount policy is known before supply subject to the condition that Mr X will reverse the ITC claimed on account of discount on the basis of credit note required to be issued by ABC Ltd. for the amount of discount as per section 34 of CGST in the month of May.