Question ID :
gst on discount
IF THERE IS NO AGREEMENT FOR ANY DISCOUNT ON SALE AT THE TIME OF SUPPLY BUT AT YEAR END SUPPLIER GIVE DISCOUNT ON WHOLE YEAR SALE TO BUYER WHETHER GST TAX BE REVERSEDON DISCOUNT BY SUPPLER AND ITC BE REVERSED BY BUYER
Answer ID :
Sep 22, 2018
Please reexamine if there really was 'no agreement at the time of supply', or there was no 'written' agreement at the time of supply.
If there was really no agreement at all, then again consider two situations, namely:
a) examine if this discount is in the nature of bad debts. If it is somewhat like bad debts, then nothing more to be done by Supplier, as full tax has already been paid at the time of supply. And Buyer to reverse credit to the extent of payment not made (Rule 37).
b) if not bad debts, but incentive for promoting sales. If it is somewhat like incentive, then Buyer needs to issue invoice for 'supply of marketing services' and charge 18% GST. With this invoice, the net payment will be exchanged but full credit will be available to the Buyer (on the original supplies) and to the Supplier (of the original supplies) through this new invoice
Further, it is merely a case where there is no 'written agreement' at the time of supply but the customary practice followed in all other cases, indicates a verbal agreement, then, issue credit note for the discount under section 34 and recover the GST portion on the discount. Caution while taking this route. Consistent practice followed with other Buyers is a indicator existence of verbal agreement for discounts.
CA. JATIN CHRISTOPHER A on
Sep 24, 2018