Clarification on various doubts related to treatment of secondary or post-sales discounts under GST. - GST - States - 60/2019-GST (CT/GST-15/Pt-1/2017/40)

GOVERNMENT OF ASSAM OFFICE OF THE COMMISSIONER OF TAXES, ASSAM KAR BHAWAN DISPUR, GUWAHATI-6 CIRCULAR NO. 60/2019-GST Dated Dispur the 1st July, 2019. Subject: Clarification on various doubts related to treatment of secondary or post-sales discounts under GST. No. CT/GST-15/Pt-1/2017/40. - Circular No. 45/2019-GST [No. CT/GST-15/2017/317 dated 14th March, 2019] was issued providing clarification on various doubts related to treatment of sales promotion schemes under GST. Post issuance of the said Circular various representations have been received from the trade and industry seeking clarifications in respect of tax treatment in cases of secondary discounts or post sales discount. The matter has been examined in order to ensure uniformity in the implementation of the law across the field formations, the Commissioner of State tax, in exercise of its powers conferred under section 168 of the Assam Goods and Services Tax Act, 2017 (hereinafter referred to as the Assam GST Act ) clarifies the issues in succeeding paragraphs. 2. For the purpose of value of supply, post sales discounts are governed by the provisions of clause (b) of sub-section (3) of section 15 of the Assam GST Act. It is crucial to examine the true nature of discount given by the manufacturer or wholesaler, etc. (hereinafter referred to as the supplier of goods ) to the dealer. It would be important to examine whether the additional discount is given by the supplier of goods in lieu of consideration for any additional activity / promotional campaign to be undertaken by the dealer. 3. It is clarified that if the post-sale discount is given by the supplier of goods to the dealer without any further obligation or action required at the dealer's end, then the post sales discount given by the said supplier will be related to the original supply of goods and it would not be included in the value of supply, in the hands of supplier of goods, subject to the fulfilment of provisions of sub-section (3) of section 15 of the Assam GST Act. However, if the additional discount given by the supplier of goods to the dealer is the post-sale incentive requiring the dealer to do some act like undertaking special sales drive, advertisement campaign, exhibition etc., then such transaction would be a separate transaction and the additional discount will be the consideration for undertaking such activity and therefore would be in relation to supply of service by dealer to the supplier of goods. The dealer, being supplier of services, would be required to charge applicable GST on the value of such additional discount and the supplier of goods, being recipient of services, will be eligible to claim input tax credit (hereinafter referred to as the ITC ) of the GST so charged by the dealer. 4. It is further clarified that if the additional discount is given by the supplier of goods to the dealer to offer a special reduced price by the dealer to the customer to augment the sales volume, then such additional discount would represent the consideration flowing from the supplier of goods to the dealer for the supply made by dealer to the customer. This additional discount as consideration, payable by any person (supplier of goods in this case) would be liable to be added to the consideration payable by the customer, for the purpose of arriving value of supply, in the hands of the dealer, under section 15 of the Assam GST Act. The customer, if registered, would be eligible to claim ITC of the tax charged by the dealer only to the extent of the tax paid by the said customer to the dealer in view of second proviso to subsection (2) of section 16 of the Assam GST Act. 5. There may be cases where post-sales discount granted by the supplier of goods is not permitted to be excluded from the value of supply in the hands of the said supplier not being in accordance with the provisions contained in sub-section (3) of section 15 of Assam GST Act. It has already been clarified vide Circular No. 45/2019-GST [No. CT/GST-15/2017/317 dated 14th March, 2019] that the supplier of goods can issue financial / commercial credit notes in such cases but he will not be eligible to reduce his original tax liability. Doubts have been raised as to whether the dealer will be eligible to take ITC of the original amount of tax paid by the supplier of goods or only to the extent of tax payable on value net of amount for which such financial / commercial credit notes have been received by him. It is clarified that the dealer will not be required to reverse ITC attributable to the tax already paid on such post-sale discount received by him through issuance of financial / commercial credit notes by the supplier of goods in view of the provisions contained in second proviso to sub-rule (1) of rule 37 of the Assam GST Rules read with second proviso to sub-section (2) of section 16 of the Assam GST Act as long as the dealer pays the value of the supply as reduced after adjusting the amount of post-sale discount in terms of financial / commercial credit notes received by him from the supplier of goods plus the amount of original tax charged by the supplier. 6. This Circular is clarificatory in nature and not meant for any interpretation of provisions of the Act and rules. 7. Difficulties, if any, in implementation of the above instructions may be brought to the notice of the Commissioner at an early date. 8. This Circular shall be deemed to have been issued on 28 th June, 2019. Sd/- Anurag Goel, IAS., Commissioner of State tax, Assam, Dispur, Guwahati Memo No. CT/GST-15/Pt-1/2017/40-A Dated Dispur the 1st July, 2019.