Provisions related to Discount for valuation under revised draft GST Law

The Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services in India. Several provisions have been laid down under the revised draft GST law, including those related to discounts for valuation. A discount is an allowance made to customers for purchasing goods or services at a reduced price, and it is a common practice in the business world. In this article, we will discuss the provisions related to discounts for valuation under the revised draft GST law.

Discounts in GST

A discount is a reduction in the price of goods or services provided by the supplier to the recipient. Discounts may be offered for various reasons, such as for bulk purchases, prompt payments, or to reduce inventory. Discounts may be given before or after the supply of goods or services. Discounts given before the supply are known as pre-supply discounts, and discounts given after the supply are known as post-supply discounts.

Pre-supply Discounts

Pre-supply discounts are offered before the supply of goods or services. These discounts may be given in the form of an agreement between the supplier and the recipient or as a provision in the invoice. The supplier may offer a discount to the recipient for various reasons, such as the purchase of bulk quantities, early payments, or loyalty programs. The revised draft GST law allows the supplier to reduce the value of the supply by the amount of discount offered to the recipient. This reduction in value is known as the discount for valuation.

The discount for valuation can be claimed only if the following conditions are met:

The discount is established in terms of an agreement entered into at or before the time of supply and specifically linked to the relevant invoice.
The recipient of the supply has undertaken to pay the amount of the invoice minus the discount.
The supplier has issued a credit note to the recipient for the amount of discount given.
The recipient has reversed the input tax credit claimed on the original invoice.

It is important to note that the discount for valuation can be claimed only if the discount is linked to the relevant invoice. This means that the discount cannot be claimed if it is not mentioned in the invoice or if it is given after the supply of goods or services.

Post-supply Discounts

Post-supply discounts are offered after the supply of goods or services. These discounts may be given in the form of a rebate or a refund. The revised draft GST law allows the supplier to reduce the taxable value of the supply by the amount of post-supply discount offered to the recipient. This reduction in value is known as the discount for valuation.

The discount for valuation can be claimed only if the following conditions are met:

The discount is established in terms of an agreement entered into at or before the time of supply and specifically linked to the relevant invoice.
The recipient of the supply has undertaken to pay the amount of the invoice minus the discount.
The supplier has issued a credit note to the recipient for the amount of discount given.
The recipient has reversed the input tax credit claimed on the original invoice.

Conclusion

The provisions related to discounts for valuation under the revised draft GST law are aimed at simplifying the compliance process for businesses. The discount for valuation can be claimed only if the discount is linked to the relevant invoice and the conditions laid down under the law are met. It is important for businesses to carefully review the provisions related to discounts for valuation and ensure compliance with the law to avoid penalties.