Additional discount granted by the supplier, reimbursed by the principal company, is additional consideration liable for GST. Further, no credit reversal is required with respect to receipt of commercial credit notes

FACTS

Prices of the products supplied by the applicant are determined by the supplier / principal company. The applicant is paying GST as per the invoice issued by them and is availing input tax credit on the inward invoice received from the principal company. The ruling is sought to determine whether discount provided by the principal company to their dealers through the applicant attracts any tax under the GST law. Further, whether the amount shown in the commercial credit note issued to the applicant by the principal company attracts proportionate reversal of input tax credit, and is there any tax liability under GST law on the amount received as reimbursement of discount or rebate provided by the principal company as per the written agreement?

HELD

The Authority held that the additional discount given by the supplier through the applicant which is reimbursed as a special reduced price is liable to be added to the consideration payable by the customer to the distributor / applicant to arrive at the value of supply in terms of section 15 of the Act. Further, with respect to commercial credit notes where the supplier is not eligible to reduce its original tax liability, no reversal of credit is required. Lastly, in case of reimbursement of discount, GST is applicable.