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CA Final · Indirect Tax Laws · Value of Supply

Gupta Appliances sold a refrigerator to Nair Stores for Rs 50,000 on 10 June. The agreement made at the time of supply provides a volume discount of Rs 2,000 specifically linked to the relevant invoice, which Gupta Appliances gave by a credit note in August. Nair Stores has not yet reversed the input tax credit attributable to the discount. Which statement is correct under section 15 of the CGST Act, 2017?

The discount cannot be excluded yet. A post-supply discount reduces value only when it follows an agreement made at or before supply, is linked to invoices, and the recipient has reversed the input tax credit attributable to it. The reversal condition is unmet here.

  1. AThe discount cannot be excluded from value until Nair Stores reverses the attributable input tax creditCorrect
  2. BThe discount is excluded because it is stated in a pre-existing agreement
  3. CThe discount is excluded because a credit note has been issued
  4. DThe discount is excluded only if it was shown on the original invoice

Explanation

A post-supply discount is excluded only if it is established under an agreement at or before the supply, specifically linked to invoices, and the recipient has reversed the input tax credit attributable to it. The first two conditions are met but the reversal is not, so the discount is not excluded. Issuing a credit note alone is not enough.

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