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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Supply under GST

Zenith Ltd. supplies goods worth ₹1,00,000 to Orbit Ltd. (unrelated) under an agreement made before the supply that gives a 4% volume discount, specifically linked to the relevant invoices, granted after the supply by a credit note. Which condition must additionally be met for the discount to be excluded from the value of supply?

The recipient must have reversed the input tax credit attributable to the discount on the basis of the supplier's document. Section 15(3)(b) requires both a prior agreement linked to relevant invoices and this ITC reversal for a post-supply discount to be excluded from value.

  1. AOrbit Ltd. must have reversed the input tax credit attributable to the discount on the basis of the supplier's documentCorrect
  2. BZenith Ltd. must have recorded the discount in the original invoice
  3. CThe discount must be at least 10% of the invoice value
  4. DThe Government must have notified the discount for the supplier

Explanation

Section 15(3)(b) allows post-supply discount exclusion if (i) established under an agreement at or before the supply and linked to invoices, and (ii) the recipient has reversed the ITC attributable to the discount on the basis of the supplier's document. The first condition is given, so the reversal is the missing one. Recording on the original invoice is only needed under clause (a), for discounts given at or before supply.

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