It is anticipated that stakeholders across sectors such as FMCG, infrastructure, electricals, electronics, furniture and jewellery will have a lot to gain from the implementation of a mechanism clarification regarding post-sale discounts as proposed by the 53rd GST Council meeting said experts.
The GST Council has recommended a method for suppliers to prove their compliance with Section 15 (3) (b)(ii) of the CGST Act, 2017 about post-sale discounts.
This move takes care of the supplier’s challenges when it comes to ensuring that recipients reverse Input Tax Credit (ITC) on credit notes like law requires. The proposal mechanism which is expected to be facilitated in collaboration with the GSTN shall enable suppliers to get acknowledgment from recipients on reversal of ITC on credit note amounts.
Field officers according to experts raised multiple claims against credit note issuers who however had no legal means of knowing if indeed ITC was reversed by recipients.
“This is because discounts are common business practice in modern trade and almost all suppliers at every level in supply chain were affected by these anomalies in the GST law. This issue impacted on nearly all taxpayers including manufacturers, distributors, wholesalers or retailers,” according to Vivek Jalan Partner-Tax Connect Advisory Services LLP -A Multi Disciplinary PAN India Tax Consulting Firm.
According to Jalan “With this clarification we expect that thousands of demands across all sectors including FMCG, infrastructure electricals electronics furniture jewellery etc will be relieved.”
When a supplier issues a post-sale discount and makes a GST Credit Note reversing its GST Output Tax liability as per Section 15 (3) (b) (ii) of the CGST Act they are responsible for ensuring that recipient reverses the ITC contained in it.
In other words when customer and recipient reverse their ITC only then can supplier and issuer of post-sale discount reduce their output GST.
Trade and industry sector require past periods provision while resolving any outstanding litigations associated with this subject, he added.
“It is likely that additional fields may be introduced in the GST Returns to capture this information specifically,” said Chetan Daga, Founder- AdvantEdge Consulting. “The exact mechanism shall be known in due course once the CBIC gives effect to the Council’s recommendations.”
