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CA Intermediate · Taxation · Tax Invoice; Credit and Debit Notes

Ravi Traders, Delhi, issued an invoice in April for taxable value of Rs 2,00,000 plus 18% IGST to a registered buyer. In July, by agreement, it gave a post-sale discount of Rs 20,000 (before tax), which was specified in the agreement before the supply and linked to the invoices, and the buyer reversed the ITC. The relevant credit note was issued in July. What is the amount of tax that Ravi can reduce from its output liability on this credit note?

Ravi can reduce Rs 3,600 of IGST. The post-sale discount of Rs 20,000 qualifies because it was agreed before the supply and is linked to invoices, so the tax reduction is 18 percent of Rs 20,000, which equals Rs 3,600.

  1. ARs 3,600Correct
  2. BRs 36,000
  3. CRs 3,240
  4. DRs 4,000

Explanation

The discount of Rs 20,000 is allowed as it was agreed before or at the time of supply and linked to invoices. Tax adjustment = 18% of 20,000 = Rs 3,600. Rs 36,000 is 18% of the whole invoice value, Rs 3,240 wrongly treats Rs 18,000 as the base, and Rs 4,000 is mistakenly 20% of Rs 20,000.

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