GST Circular 251/08/2025 – Clarification on Post-Sale Discounts under GST

Circular No.: 251/08/2025-GST

Date of Circular: 12th September 2025
Issued by: CBIC – GST Policy Wing
Subject: Clarification on tax treatment of secondary or post-sale discounts under GST

Relevant Sections and Rules from GST Law:

• Section 16(1), CGST Act, 2017 – Conditions for availment of ITC
• Section 2(31), CGST Act, 2017 – Definition of “consideration”
• Section 168(1), CGST Act, 2017 – Power to issue instructions

Clarification 1 – ITC Availability on Discounted Payment via Financial/Commercial Credit Notes:

It is clarified that when a supplier issues financial or commercial credit notes post-sale without reducing the original transaction value or tax liability:

• The recipient can retain full ITC on the original tax amount.
• No ITC reversal is needed since tax paid remains unchanged.
• This is consistent with Circular No. 92/11/2019-GST and aligns with Section 16(1), as credit is on tax actually paid.

✅ Conclusion: No reversal of ITC is required if tax liability remains unadjusted despite post-sale discounts.

Clarification 2 – Whether Post-Sale Discount Is a “Consideration” for Dealer’s Supply to End Customer:

The circular distinguishes between two scenarios:

1. No direct contract between manufacturer and end customer:
   • The transaction is principal-to-principal (manufacturer to dealer).
   • Dealer owns goods and sells independently to the end customer.
   • Discounts are commercial in nature, not linked to inducement.
   • ✅ Conclusion: Discount is not consideration under Section 2(31).
2. Where manufacturer agrees with end customer to supply goods at discount:
   • Manufacturer issues commercial/financial credit notes to dealer to enable discount.
   • In such cases, the discount supports an agreed price with the end customer.
   • ✅ Conclusion: Such discount shall be treated as consideration (inducement) and included in the value of supply.

Clarification 3 – Whether Post-Sale Discount Is Consideration for Promotional Services by Dealer:

• If the dealer independently undertakes promotional activities without contractual obligation, such discounts:
  • Are not treated as consideration for a separate service.
  • Just reduce the sale price of goods.

✅ Conclusion: No GST on discounts given for general promotional efforts by dealers.

❗ However, if there is a specific agreement for activities like:

• Advertising campaigns
• Co-branding
• Exhibition setups
• Customization
• Customer support, etc.

…and a defined consideration is payable, then:

• The dealer is providing a separate supply of service, and
• GST is chargeable on such promotional services.

Source: Circular No.: 251/08/2025-GST