As per the revised draft GST law, there are certain provisions related to discount for valuation that small and medium business owners and startup founders must be aware of. Understanding these provisions will help them in managing their business in a more efficient and effective manner. In this article, we will explain all the necessary details related to discount for valuation under the revised draft GST law.
The concept of discount for valuation refers to the reduction in the value of goods or services due to certain reasons such as damage, quality issues, or any other defect. Under the GST regime, the value of taxable goods and services is determined as per the transaction value, which is the price actually paid or payable for the goods or services.
However, in case of discounts, the transaction value may not always be the actual price paid or payable. Discounts can be of various types such as trade discount, cash discount, quantity discount, etc. and are given for different reasons. The discount for valuation is the reduction in the value of goods or services due to any such discount.
The following provisions related to discount for valuation have been included in the revised draft GST law:
Under the revised draft GST law, the value of goods or services shall be reduced by the amount of discount given to the buyer, provided such discount is allowed in the course of normal business practice and has been duly recorded in the invoice issued to the buyer. The discount should be given before or at the time of the supply of goods or services and should be linked to the relevant invoice.
It is important to note that the discount should be given only for the reason of business practice and should not be linked to any other condition such as the volume of sales or performance of the buyer.
If the discount is given after the supply of goods or services, then it shall not be allowed as a deduction in the value of goods or services for the purpose of determining the GST liability. Thus, it is important for the small and medium business owners and startup founders to ensure that the discount is given before or at the time of supply of goods or services.
If the supplier has already paid the tax on the value of goods or services before giving the discount, then he shall not be required to reverse the input tax credit claimed on such goods or services. However, if the supplier has not paid the tax on the value of goods or services before giving the discount, then he shall be required to reverse the input tax credit claimed on such goods or services.
If the supplier and the buyer are related persons, then the value of goods or services shall be determined as per the open market value. In this case, the discount for valuation shall not be allowed as a deduction in the value of goods or services for the purpose of determining the GST liability.
The provisions related to discount for valuation under the revised draft GST law have been introduced to ensure that the value of goods or services is correctly determined and the tax liability is calculated accurately. Small and medium business owners and startup founders must understand these provisions and ensure that the discounts given by them are in line with the provisions mentioned in the revised draft GST law.
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