Our Bureau
New Delhi
As the new reforms for the Goods and Services Tax (GST) were announced by the government there has been a lot of curiosity about its implementation set to happen on September 22nd. The Central Board of Indirect Taxes and Customs (CBIC), before the date of implementation, has clarified that GST will not be put on the post-sale discounts given by manufacturers to dealers. The discounts are given through competitive pricing or promotional activities in order to boost the sales.
In a statement issued by the CBIC, they have clarified that the buyers need not reverse the Input Tax Credit (ITC) when they make discounted payments to the supplier of goods. The board has also stated that the supplier can issue either financial or commercial credit notes after which the seller won’t be eligible to drop down their original tax liability. This will then not result in the reversal of ITC so the GST from the buyer won’t see any reduction.
“Section 16 (1) of the CGST Act, 2017 provides that every registered person shall be entitled to take credit of input tax charged on any supply of goods or services or both, which are used or intended to be used in the course or furtherance of his business… it is clarified that the recipient will not be required to reverse the input tax credit attributed to the discount provided on the basis of financial/commercial credit notes issued by the supplier, as there is no reduction in the original transaction value of the supply and accordingly the corresponding tax liability would also not get reduced,” the CBIC stated in the circular issued this Friday, on September 12.
However, the government has stated that the indirect tax would be levied in instances where a dealer undertakes sales promotional activities, such as advertising campaigns, co-branding, customisation services, exhibitions or customer support services as part of their agreement with the manufacturer.
