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

Meera Pharma sold goods to Nikhil Distributors for Rs 1,00,000 under an agreement made before the supply, which gave a 5% volume discount after the supply, specifically linked to the relevant invoices. Nikhil has not reversed the input tax credit attributable to the discount. Is the post-supply discount excludable from value?

No. A discount given after the supply is excluded only if it is based on a prior agreement linked to invoices and the recipient has reversed the input tax credit attributable to it. Since the credit was not reversed, the discount cannot be excluded from value.

  1. AYes, because the agreement existed before the supply
  2. BYes, because every discount reduces transaction value
  3. CNo, because the recipient has not reversed the related input tax creditCorrect
  4. DNo, because post-supply discounts can never be excluded

Explanation

Under section 15(3)(b), a post-supply discount is excluded only if both conditions are met: an agreement at or before supply linked to invoices, and reversal of attributable input tax credit by the recipient. Here the second condition fails, so the Rs 5,000 discount remains in value. The claim that such discounts can never be excluded is wrong since the section allows it when both conditions hold.

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