QUESTION
PLEASE PROVIDE THE
NOTIFICATION \ CIRCULARS ALONG WITH THE JUDGEMENTS REGARDING DISCOUNT I.E.
TRADE,DISCOUNT, TURNOVER DISCOUNT, CASH DISCOUNT AND QUANTITY DISCOUNT, ADHOC
DISCOUNT ETC. ISSUED BY THE CEMENT COMPANIES SUPPLIER I.E. J.K. CEMENT, BIRLA
CEMENT, WONDER CEMENT, NUVOCO VISTAS CORPORATION LTD, IN THE FORM OF CREDIT
NOTES ON WHICH GST IS NOT CHARGED.
ANSWER
Facts of the case:
NOTIFICATION \ CIRCULARS ALONG WITH THE JUDGEMENTS REGARDING DISCOUNT I.E.
TRADE,DISCOUNT, TURNOVER DISCOUNT, CASH DISCOUNT AND QUANTITY DISCOUNT, ADHOC
DISCOUNT ETC. ISSUED BY THE CEMENT COMPANIES SUPPLIER I.E. J.K. CEMENT, BIRLA
CEMENT, WONDER CEMENT, NUVOCO VISTAS CORPORATION LTD, IN THE FORM OF CREDIT
NOTES ON WHICH GST IS NOT CHARGED.
Law Applicable: Section 15 of
GGST Act, 2017
Section 15:Value
of taxable supply
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(3) 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.
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Relevant Circulars:
Circular No. 92/11/2019 dt 7.3.2019
Circular No. 105/24/2019 dt 28.6.2019
There is no specific ruling/circular for cement companies.
Solution:
Value is to be determined as per Section 15 of the CGST Act.
Treatment of Various discounts is as follows:
Case 1 Discount is given at the time of supply
Case 2 Discount is given on a future date after achieving some target
/volume or because of late delivery or defective material etc .
Treatment
Case 1 Deduct it from the assessable value and charge tax on the discounted
value.
Case 2 Issue a credit note for the discount amount
You have following two alternatives
Alternative 1 for case 2
Issue a credit note with reduction of GST and reduce the tax liability in GSTR
3B
Alternative 2 for case 2
Issue a credit note without taking the transaction in GST return .This is called
commercial credit note .The customer will take credit on the original value but
will pay you tax plus discounted value
Suppose original invoice is for Rs 100 plus GST Rs 10 and discount given is Rs
20 through commercial credit note (Circular No. 105/24/2019 dt 28.6.2019, PARA
5) .Then customer will take credit of RS 10 and will pay you 90 Rupees (Rs 80
for goods and Rs 10 for tax ).
The relevant circular are
Circular No. 92/11/2019 dt 7.3.2019
Circular No. 105/24/2019 dt 28.6.2019
Note: You can easily find relevant circulars through search by using
keywords > discount value.
(Reply dt. 07/07/2021)