Offering Post-Sale Discounts in GST: Compliance Checklist. Sellers often utilize post-sale discounts to attract buyers and manage their net sale values, which impacts their GST liabilities and compliance obligations. Understanding the treatment of these discounts under GST is crucial for ensuring compliance. GST Registration. Here’s a comprehensive checklist based on the current legal framework and recent GST Council recommendations:
- Legal Framework for Discounts under GST:
- Discounts provided at the time of supply can be adjusted in the invoice to reduce the output tax liability accordingly (Section 15 of CGST Act, 2017).
- Post-supply discounts are issued after the initial invoice and require a subsequent issuance of credit notes to adjust the output tax liability. GST Filing.
- Challenges and Chaos:
- Suppliers face difficulties in proving that buyers have reversed Input Tax Credit (ITC) claimed for the discounted amount.
- GST law lacks a mechanism to verify ITC reversals corresponding to credit notes, leading to compliance challenges and disputes with tax authorities.
- GST Council’s Solutions:
- Long-term Solution: Implementation of a functionality on the GST portal to verify ITC reversals corresponding to credit notes.
- Immediate Arrangement: Until the portal functionality is in place, suppliers may:
- Furnish a Chartered Accountant (CA) certificate confirming ITC reversal by buyers.
- Provide a self-undertaking stating compliance with ITC reversal requirements.
- Implementation Suggestions:
- Documentation: Maintain comprehensive records of all credit notes issued and communications with buyers regarding ITC reversals.
- Compliance Check: Regularly review GSTN portal updates and notifications for any new functionalities related to credit note verifications.
- Engage with Tax Advisors: Seek guidance from tax advisors to ensure proper interpretation and implementation of GST rules on discounts.
- Impact on Taxpayers:
- Suppliers will need to adapt their internal processes to comply with new documentation and verification requirements.
- Improved transparency and compliance may reduce disputes and demands from tax authorities.
By adhering to these guidelines and staying informed about regulatory updates, sellers can navigate the complexities of offering post-sale discounts under GST effectively. This approach not only ensures compliance but also supports smoother business operations in line with GST regulations.
