Post-sale discounts to attract GST of 18%

The dealer would be eligible to get input tax credit on entire amount of GST paid if the discount is given after the sale of product, where the dealers will have to pay 18 per cent goods and services tax (GST) on the post-sale discount that their company gives to them if it asks them to do promotional activities or pass on the concessions to the end consumer.

Earlier this provision was not there, if discount is given to them without any obligation, he would not be needed to pay GST on it. Also, the dealer would be eligible to get input tax credit on entire amount of GST paid if the discount is given after the sale of product. post-sale 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.

Now onwards, if there any additional discount given for special reduced price to augment the sales will be liable to GST. The Finance Ministry on Friday said the additional discount given by a company to a dealer in certain cases will be liable to Goods & Services Tax (GST).

The GST Policy Wing of the Central Board of Indirect Taxes & Customs (CBIC) issued a clarification on various doubts related to treatment of secondary or post-sale discounts for applicability of indirect tax. It said where the discount is linked to specific activities to be done by the dealer such as advertisement, exhibition, etc, it would qualify as a supply by the dealer to the company and the dealer would have to pay GST.

Similarly, additional discount given for special reduced price to augment the sales will be liable to GST. According to the circular, where any reduction in prices are allowed by supplier to dealers with the condition of the same being passed on by the dealers to the end customer, it would be added to the value of supply of dealer to consumer for payment of GST.