CBIC has issued Circular 251/08/2025-GST to provide clarity on the treatment of secondary/post-sale discounts offered by manufacturers to dealers/distributors.
Input Tax Credit & Commercial Credit Notes
You don’t need to reverse ITC for post=sale discounts received via financial or commercial credit notes, as the original tax liability of supplier isn’t reduced.
Post-Sale Discounts
Discounts given by a manufacturer to a dealer are not considered ‘consideration’ for further supply unless there’s a pre-existing agreement with the end customer.
Post-Sale Discounts as a Service
Post-sale discounts aren’t typically treated as payment for separate services, but GST will apply if a dealer performs specific promotional activities for a defined fee under a separate agreement.
These clarifications aim to bring uniformity to how post-sale discounts are treated under GST.
It’s crucial for businesses to document and distinguish trade discounts, end-customer agreemens and explicit promo services, as well review potential TDS implications on promotional payments/incentives.
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