Discounts are commercially simple but tax-sensitive. GST treatment depends on timing, whether the discount was agreed upfront, whether it links to specific invoices and whether the recipient reverses attributable ITC where required.
Under Section 15, discounts given before or at the time of supply can be excluded from value if they are recorded in the invoice. Post-supply discounts have stricter conditions: they should be established in terms of an agreement entered at or before the time of supply, specifically linked to relevant invoices, and the recipient should reverse attributable ITC on the discount basis where applicable.
| Discount/scheme | Key GST check | Evidence |
|---|---|---|
| Invoice discount | Recorded on original tax invoice? | Tax invoice and pricing approval. |
| Year-end volume discount | Was it agreed before/at supply and linked to invoices? | Scheme circular, agreement, invoice mapping. |
| Target incentive/marketing support | Is it discount or separate supply/service? | Dealer agreement and deliverables. |
| Goods return/deficiency credit note | Does Section 34 permit credit note? | Return documents, debit/credit notes, stock records. |
Section 34 permits credit notes where taxable value or tax charged in the invoice exceeds the proper value/tax, where goods are returned, or where goods/services are deficient. Credit notes must be reported within the statutory timeline and output tax reduction has conditions, including recipient ITC reversal where relevant.
This draft uses official GST law, rules, GST Council, CBIC/GST portal and government-source material only. Before publishing, re-check whether any notification, circular, rule text or portal workflow has changed after the draft date.