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To attract customer in your business some time we need to provide then good discount which may be of following type cash discount, trade discount, volume discount, percentage discount etc. now we need to understand the applicability of GST on discount Under GST there is no bifurcation in all above discount type, but there are two category in which discount is bifurcated.

Discount offered before or at the time of supply

Discount offered after the supply has been done

In this article we will discuss about the different type of discounts and procedure for.

Section 15 of GST Act

As per the provision of Section 15 of the CGST Act, 2017, deals with the provisions of discounts under GST, the same has been reproduced hereunder for reference purpose:

The value of the supply shall not include any discount which is given:

Before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and

After the supply has been effected, if –

Such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices, and

Input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

From the above section we can see that the intention of department is to bifurcate the discount in two categories, one is before sale and second is after sale.

If Discounts at Time of Supply or before supply

Discounts given at the time of supply or before supply should be deducted from the value or supply and remaining amount is supply for the purpose of charging GST. Discount should be clearly visible in the invoice.


Suppose company offers discount @12% on sales of INR 10,000/-.

Discount amount would be INR 1,200/-.

In such case in the invoice the amount 1200 should be deducted from the invoice value and remaining amount is chargeable to tax.

Discount Offered After Supply

Sometimes the seller provide discount after sale to improve collection or maintain customer in the market. In this case the seller is not aware about the discount to be in future to the customer. In such cases, GST on discount would not be applicable only if the following conditions are satisfied:

There is agreement between receiver and supplier at the time of supply of before supply

Discount should be related to the specific invoice.

Input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

When all the above conditions are fulfilled, the value of supply will not include the discount amount and GST would not be applicable on the discount provided.

For any other query regarding this contact our Online CA.

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