Discount under GST concept

Meaning: Any deduction from the usual cost of goods or services at the time of supply is called Discount under GST. There are three types of discount in accounting viz Cash discount, trade discount, and quantity discount.

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GST Discount Concept for Valuation

According to the CGST Section 15(3), the value of supply shall not include the below types of discounts.

  • A Discount is given before or at the time of the supply. if such a discount has been duly recorded in the invoice issued in respect of such supply.
  • Discount is given on Post-sales: if such a discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices.
  • Input tax credit as is attributable to the discount on the basis of invoices/debit notes issued by the supplier has been reversed by the recipient of the supply.

Discount on offers: Buy more and Save more

According to the Circular No. 92/11/2019-GST, dt.07.03.2019 discounts offered by the suppliers to customers shall be excluded to determine the value of supply. It includes staggered discount under “buy more, save more‟ scheme and post supply/volume discounts established before or at the time of supply.

Input Tax Credit

The supplier shall be entitled to avail Input Tax Credit on receipt of the above goods or services and capital goods. However, such input must be used in relation to the further supply of goods or services or both on such discounts.

Secondary Discount Concept

There are certain types of discounts that are not known at the time of supply or are offered after the supply is already over. These are called secondary discount under GST.

According to the Circular No. 92/11/2019-GST, the credit note(s) can be issued as a commercial transaction between the two contracting parties viz supplier and the receiver. Thus, a secondary discount can be given through credit note after-sales are affected.

Latest updates

  • CBIC withdraws Circular No. 105/24/2019-GST dated 28.06.2019 through circular no. 112/2019 dt. 03-10-2019.
  • CBIC issued Circular No. 105/24/2019-GST dated 28.06.2019 regarding secondary and post sale discount.
What is Trade Discount under GST?

The amount deducted by the seller from the price list of goods or services is called a trade discount.

What is Cash Discount under Goods and Service Tax?

It is a type of discount given by the supplier of goods or services to the recipient for making cash payments towards supply. Also, it may be given to realize the previous outstanding amount within a given period of time.

What is called Quantity Discount in GST?

The discount given for purchasing a specific quantity set by the supplier is called Quantity discount under the GST system. For eg. ABC Ltd. Offers a 5% discount for purchasing 1000 pcs branded shoes. Whereas he gives a 10% discount for buying shoes without any brand.