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CA Final · Indirect Tax Laws · Value of Supply

Kaveri Traders supplies goods to Lakshmi Retail under an agreement made at the time of supply, offering a 4% discount if payment is made within 30 days, specifically linked to the relevant invoices. The invoice value before discount is Rs 5,00,000. Lakshmi pays within 30 days, and Kaveri issues a credit note for Rs 20,000. Lakshmi has reversed the ITC attributable to the discount. What is the value of supply for Kaveri?

The value of supply is Rs 4,80,000. A discount given after supply is excluded under section 15(3)(b) when it is based on an agreement made at or before the supply, linked to specific invoices, and the recipient has reversed the related input tax credit. All three conditions are met here.

  1. ARs 5,00,000, because post-supply discounts are never excluded
  2. BRs 4,80,000, because all the conditions in section 15(3)(b) are metCorrect
  3. CRs 4,80,000, only if the discount is shown in the original invoice
  4. DRs 5,20,000, because the credit note adds to the value

Explanation

Section 15(3)(b) excludes a post-supply discount if it is established in an agreement at or before the supply, specifically linked to invoices, and the recipient has reversed the ITC attributable to it. All conditions are satisfied, so value = 5,00,000 - 20,000 = Rs 4,80,000. Option A wrongly says such discounts are never excluded.

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