Question

XYZ is issuing invoice for the supply of goods and charging full GST on the full value of the invoice. At the bottom of the invoice, a remark is given as ‘if payment is received within 7 days, 2% discount will be given’. Can XYZ subsequent to supply issue credit note with GST to the customer for 2% discount if the payment is received within 7 days and reduce his GST liability in that month to the extent of the GST on 2% discount shown in the credit note?

Answer

As per Section-15(3) of CGST Act, 2017 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 your case rate and condition for giving discount is given as remark at the bottom of the invoice i.e. discount is decided before the time of supply which is as per the above mentioned provision.

Hence liability will be reduced to the extent of GST on discount value. (Reply dt.08/04/2019)