GST can’t be demanded on post-sale discounts received by way of financial credit notes on the ground that taxpayer has promoted business of seller
Here is an interesting case on the GST applicability in case of post-sale discount given by issuing credit note. The case revolved around the treatment of post-sale discounts received via financial credit notes. The assessing officer considered these discounts as a service provided by the purchaser to the supplier, leading to the reversal of input tax credit.
Let us have a short overview of the case:
TVL SHIVAM STEELS, the petitioner, faced a show cause notice related to the credit notes issued by their supplier.
The dispute centered on whether the discounts should be treated as a reduction in the value of supply or as a separate service.
The assessing officer concluded that the taxable person is providing a service to the supplier while taking the benefit of a discount by facilitating an increase in the volume of sales of such supplier.
Court Judgment:
The Madras High Court clarified that the value of supply should not include post-sale discountd.
The assessing officer’s conclusion that the taxable person provides a service to the supplier while taking advantage of a discount was erroneous. Discounts should be treated as per the provisions of sub-section (3) of Section 15 of applicable GST statutes.
The court held that the discounts were not a separate service but rather an adjustment to the transaction value.
The court set aside the order insofar as it related to the reversal of input tax credit for the value of credit notes issued by the supplier.
Conclusion:
1.Post-sale discounts via credit notes are not taxable supplies.
2.Assessing officers must correctly interpret the nature of such discounts.
3.Businesses aren’t liable to reverse input tax credit on post sale discounts received through financial credit notes.
This ruling has significant implications for businesses dealing with post-sale adjustments.
The Copy Of the Order as Under:
