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CS Executive · Tax Laws and Practice · Time, Value and Place of Supply

A manufacturer sells goods to a customer for Rs 1,00,000. Under a prior agreement linked to specific invoices, it later gives a Rs 5,000 discount by credit note after the supply. Which statement about excluding this post-supply discount from value is correct under Section 15(3)?

A post-supply discount is excluded only if it was established by an agreement at or before the supply and linked to relevant invoices, and the recipient has reversed the input tax credit attributable to it. A credit note alone is not enough.

  1. AIt is excluded only if the discount is established in an agreement at or before the supply, linked to relevant invoices, and the recipient has reversed the attributable input tax creditCorrect
  2. BIt is excluded merely because a credit note has been issued
  3. CIt is never excluded because the supply has already been effected
  4. DIt is excluded only if the discount is given before the due date of payment

Explanation

Section 15(3)(b) requires both that the discount be established under an agreement at or before the supply and specifically linked to invoices, and that the recipient reverse the ITC attributable to it. A credit note alone does not meet this. Post-supply discounts can qualify, so 'never excluded' is wrong, and the due date plays no role.

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