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CMA Intermediate · Direct and Indirect Taxation · Time and Value of Supply

Rao Distributors sells goods to an unrelated buyer for ₹1,00,000. After the supply, it gives a ₹8,000 discount under a pre-supply agreement specifically linked to the relevant invoices, and the recipient has reversed the proportionate input tax credit. Which statement about the value of supply is correct?

The value is ₹92,000. A discount given after supply is excluded under Section 15(3)(b) when it is based on an agreement made at or before supply, is linked to specific invoices, and the recipient has reversed the related input tax credit.

  1. AThe value remains ₹1,00,000 because post-supply discounts are never excluded
  2. BThe value is ₹92,000 because the discount conditions in Section 15(3)(b) are metCorrect
  3. CThe value is ₹1,08,000 because the discount is added
  4. DThe value is ₹92,000 only if the discount is recorded in the original invoice

Explanation

Section 15(3)(b) excludes a post-supply discount if it is established under an agreement at or before supply, linked to the invoices, and the recipient reverses the attributable input tax credit. All conditions are met, so value = 1,00,000 − 8,000 = ₹92,000. Invoice recording is required only for discounts under clause (a).

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