Circular No.: 212/6/2024-GST
Date of Circular: 26th June 2024
Relevant Sections and Rules:
- CGST Act, 2017:
- Section 15(3)(b)(ii): Conditions for post-supply discount exclusion from taxable value
- Section 34: Credit notes
- Section 168(1): Power to issue instructions
- Supporting Documentation:
- CA/CMA certification for ITC reversal
- FORM GST DRC-03 / GST returns
Summary of Clarification Provided:
- Post-Supply Discounts Through Credit Notes – Evidence for ITC Reversal:
As per Section 15(3)(b)(ii) of the CGST Act, post-supply discounts offered via credit notes can be excluded from taxable value only if the recipient reverses proportionate ITC.
However, there is no online portal mechanism to verify this reversal, leading to difficulties for suppliers and tax officers.
- Provisional Mechanism – Certification from Recipient (CA/CMA or Undertaking):
Until an online facility is available, the following evidentiary mechanism is prescribed:
- For credit notes with tax impact above ₹5,00,000 per financial year per recipient:
The supplier must obtain a certificate from a Chartered Accountant (CA) or Cost Accountant (CMA) of the recipient certifying:- That the recipient has duly reversed ITC attributable to the discount.
- Certificate must include:
- Credit note and invoice details
- Amount of ITC reversed
- Reference to FORM GST DRC-03 or return/document used for reversal
- The certificate must carry a valid UDIN (can be verified online at ICAI/ICMAI sites).
- For credit notes with tax impact up to ₹5,00,000 per financial year per recipient:
A self-certification or undertaking by the recipient (instead of CA/CMA certificate) is sufficient, with the same details as above.
- Admissibility of Such Evidence:
These CA/CMA certificates or recipient undertakings will be accepted as valid evidence of ITC reversal under Section 15(3)(b)(ii) and can be presented in audits, scrutiny, investigations, etc.
Source: Circular No.: 212/6/2024-GST
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