Guide to GST on Discounts and Sales Return and Credit Note

August 3, 2017   admin  Editorial
GST on Discounts and Sales Return and Credit Note
1 Star2 Stars3 Stars4 Stars5 Stars (0 votes, average: 0.00 out of 5)
Loading...

Guide to GST on Discounts and Sales Return and Credit Note
By  CA Gaurav Gupta (FCA, LLB,DISA)


      To Download the Copy of Guide in PDF : Click Here


Contents

1. Introduction
2. Sales Return of Supplies made post GST (i.e. after 1.07.2017)
3. Sales Return of Supplies made prior to GST (i.e. before 1.07.2017) and when returned post GST
4. Discounts for Supplies made after GST (i.e. Supplies made after 01.07.2017)
5. Discounts for supplies made prior to 1.7.2017
6. Credit Notes
7. Disclaimer

1. Introduction

Discounts are inherent part of any commercial transaction. Such discounts go on to reduce the amount recoverable from the customer.
However, not all discount shall result in reversal of corresponding GST applied on them. Discounts can be classified in two broad categories – Pre supply discounts and Post Supply Discounts. We shall discuss the tax implications on Discounts and Credit notes in detail in the following paragraphs.

2. Sales Return of Supplies made post GST (i.e. after 1.07.2017)

In case of Supplies made post GST, when such supply is returned to the Supplier on any day prior to September of subsequent year (see para 6), a Credit note can be issued by the Supplier and tax thereon can be reversed by the Supplier on such return. It is immaterial as to whether such Supply return is made by a registered person or not.

3. Sales Return of Supplies made prior to GST (i.e. before 1.07.2017) and when returned post GST

3.1. Supplies made to registered Persons

a. Where Supplies are made to registered suppliers When such goods are returned to any place of business by a registered person, the return of such goods shall be deemed to be a supply and such registered person shall issue tax invoice charging requisite tax on such return (considered as supply)

3.2. Supplies made to a Person other than registered person

a. Where such supplies were made not prior to 01.01.2017 When such goods are returned to any place of business on or after 01.07.2017, refund of tax so paid need to be applied to the government. However, such goods should be returned not later than 31.12.2017.

b. Where such supplies were made not prior to 01.01.2017 When such goods are returned to any place of business on or after 01.07.2017, but later than 31.12.2017, no refund of tax so paid shall be given to the supplier.

c. Where such supplies were made prior to 01.01.2017 When such goods are returned to any place of business on or after 01.07.2017, no refund or reversal of tax so paid is allowed.

4. Discounts for Supplies made after GST (i.e. Supplies made after 01.07.2017)

4.1. Pre Supply discounts (Discounts given prior to the Supply of Goods)

As per section 15(3) of CGST Act, 2017, discounts like trade discount, quantity discount etc. is part of the normal trade and commerce. Therefore, pre-supply discounts i.e. discounts recorded in the invoice have been allowed to be excluded while determining the taxable value and GST shall be levied

4.2. Post Supply discounts (Discounts given after the Supply of Goods)

As per section 15(3) of CGST Act, 2017, discounts provided after the supply can also be excluded while determining the taxable value, provided three conditions are met, namely:

(a) discount is established in terms of a pre supply agreement between the supplier and the recipient

(b) such discount is linked to relevant invoices i.e. invoice details should be mention in Invoices

(c) input tax credit attributable to the discounts is reversed by the recipient i.e. no reversal of post supply discount can be made in case where supplies was made to unregistered supply If the conditions are not satisfied, no reversal of tax shall be made on such amounts.

5. Discounts for supplies made prior to 1.7.2017

5.1. Supply to a registered person

As per section 142(2)(b) of CGST Act, 2017, a registered person, who has supplied such goods or services or both to another registered person, may issue to the recipient a credit note containing such particulars as may be prescribed within thirty days of such price revision, provided the recipient of the credit note has reduced his input tax credit corresponding to such reduction of tax liability

5.2. Supply to a person other than a registered person As per section 142(2)(b) of CGST Act, 2017, no Tax can be reversed on any credit note issued to a person other than a registered person in light of any discountgiven post 1.7.2017.

6. Credit Notes

6.1. Credit Note for supplies made after 1.7.2017 As per section 34(1) of CGST Act, 2017 provides that a registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed in the following cases:

– where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to

– exceed the taxable value or tax payable in respect of such supply
– where the goods supplied are returned by the recipient
– where goods or services or both supplied are found to be deficient

Thus, in case of all Discounts, where the value shall stand reduced, a credit note can be issued to the recipient (when supply is made after 01.07.2017).

6.2. Time Limit for Issuance of Credit Note

As per Section 34(2) of CGST Act, 2017, a registered person can issue a credit note not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. Thus for FY 2017-18, no Credit note can be issued post September 30, 2018 or filing of annual return (due date of filing of annual return is December 31, 2018).

6.3. Details required in credit Note

Every Credit note need to have the following details:

– name, address and GSTIN of the supplier;
– nature of the document;
– a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and “/”respectively,, and any combination thereof, unique for a financial year;
– date of issue of the document;
– name, address and GSTIN or UIN, if registered, of the recipient;
– name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;
– serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
– value of taxable supply of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient; and signature or digital signature of the supplier or his authorized representative.

7. Disclaimer

Due care and diligence have been taken while editing and publishing of this Guide. The author does not hold any responsibility for any mistake that may have inadvertently crept in. The author shall not be liable for any direct, consequential, or incidental damages arising out of the use of this Guide. In certain parts of the Guide, the views expressed are personal views of the author and are no authority in law. To avoid any doubt, readers are suggested to cross check the contents with original government publications.

  • The Guide is based on the understanding as envisage above. If there is any change in the understanding, our comments may vary significantly.
  • This Guide is restricted to issues under GST on employee consideration / reimbursements. No other direct or indirect tax issues have been examined.
  • The comments in this memorandum are purely a matter of interpretation and not binding. The tax authorities may take a different view.
  • The author has no responsibility to update this Guide, unless specifically requested. This Guide is based on the statutory/legal positions including judicial and administrative interpretations thereof prevailing upto and inclusive of the date of the Guide.
  • This Guide is solely for the information purpose. The Guide may not be used for any other purpose, or distributed to any other party, without riorwritten consent.

(Article by CA Gaurav Gupta)

Download Guide to GST on Discounts and Sales Return and Credit Note  : Click Here

Print Friendly, PDF & Email

1 thought on “Guide to GST on Discounts and Sales Return and Credit Note”

  1. Sir,
    In case sales returns by the recipient to the seller can recipient issue a outward supply invoice instead of taking a credit note from the seller since we have around 80-100 rejections invoices per day and to take a credit note in each case from seller is practically not possible.

Leave a Reply

Your email address will not be published. Required fields are marked *