Input tax credit would not be denied under the goods and services tax (GST) system even when a company receives post-supply discounts, provided the entire tax liability is paid, the authority for advance rulings (AAR) in Andhra Pradesh has ruled.
Vedmutha Electricals, a distributor of electronic goods, sought advance ruling whether it can claim a full credit on the original invoice amount even if the discount is not reflected in the invoice.
The company regularly receives post-supply discounts from its supplier under various schemes such as turnover discount and quantity discount. For discounts, the supplier has raised financial or commercial credit notes without GST for accounting purposes only.
These notes were accounted for by Vedmutha Electricals and also disclosed by distributors in their Income Tax returns.
The supplier does not reduce its output tax liability in respect to these notes as GST provisions don’t permit exclusion of post-supply discounts from transaction value.
Vedmutha also sought to know whether it is required to reverse the input tax credit proportionately to the extent of the financial or commercial notes issued by the supplier.
Source: Business Standarad
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