1. I am giving Discount to my customer if he makes payment within fixed days.
A. Whether it is necessary to issue Credit Notes and To Reverse GST----------No.
B. If I issue credit notes and reverse/pay GST whether my customer will get Input credit-Yes.
First here see relevant section
Section 15(3) of CGST Act read as under:-
(3) The value of the supply shall not include any discount which is given––
(a) before or at the time of the supply if such discount has been duly recorded inthe invoice issued in respect of such supply; and
(b) after the supply has been effected, if—(i) 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
(ii) 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..
Opinion:- In this section it is provided that the Discount can be deducted from Value of the goods and it is not mandatory to pay GST on Discount. BUT IT DOES NOT MEAN THAT IF GST HAS BEEN PAID OF DISCOUNT IT IS MANDATORY TO REVERSE AT THE TIME OF GIVING DISCOUNT
Now here is a circular No. 92/11/2019 dated 07/03/2019. The relevant portion of the circular is as under:-
D Secondary Discounts.
i These are the discounts which are not known at the time of supply or are offered after the supply is already over. For example, M/s A supplies 10000 packets of disccounts to M/s B at Rs. 10/-per packet. Afterwards M/s A re-values it at Rs. 9/-per packet. Subsequently, M/s A issues credit note to M/s B for Rs. 1/-per packet.
ii.The provisions of sub-section (1) of section 34 of the said Act provides as under:
“Where one or more tax invoices have 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, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed".
iii. Representations have been received from the trade and industry that whether credit notes(s) under sub-section (1) of section 34 of the said Act can be issued in such cases even if the conditions laid down in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied. It is hereby clarified that financial / commercial credit note(s) can be issued by the supplier even if the conditions mentioned in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied. In other words, credit note(s) can be issued as a commercial transaction between the two contracting parties.
iv. It is further clarified that such secondary discounts shall not be excluded while determining the value of supply as such discounts are not known at the time of supply and the conditions laid down in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied.
v. In other words, value of supply shall not include any discount by way of issuance of credit note(s) as explained above in para 2 (D)(iii) or by any other means, except in cases where the provisions contained in clause (b) of sub-section (3) of section 15 of the said Act are satisfied.
vi. There is no impact on availability or otherwise of ITC in the hands of supplier in this case
OPINION :- In this circular it has been clarified ALSO that there is no mandatory to issue credit notes when after sales discounts are provided . Circular say Credit CAN BE issued not say Credit Not WILL be issued. Even if Credit Notes to be issued conditions of section 15(3)(b) to to be fullfilled i.e. there should be a written agreement befween supplier and purchaser that this discount will be provided.
