Clarification on Post-Sale Discounts under GST

A recent circular issued on September 12, 2025, by the CBIC explains that regular post-sale discounts given by producers to dealers will still be outside the purview of GST.

CBIC clarifies that normal post-sale discounts are not taxable under GST except when tied to certain services like co-branding or promotion. Representations have been received requesting for clarifications on tax treatment in the case of secondary discount or post-sale discount.

• Representations received regarding tax treatment of secondary/post-sale discounts.
• Matter examined by CBIC.
• Section 168(1) of the CGST Act, 2017 was clarified in order to guarantee uniformity.

Clarification on Post-Sale Discounts under GST

• Queries raised on GST treatment of secondary/ post-sale discounts.
• CBIC reviewed the matter.
• Clarification issued under Sec. 168(1), CGST Act for uniform practice 

Issues and Clarifications-Post-sale discount

Issue 1: Input Tax Credit (ITC) on discounted payments through financial/ commercial credit notes 

• Section 16(1) allows ITC on supplies used in business.
• As per Circular No. 92/11/2019:

1. Supplier may issue financial/ commercial credit notes.
2. No reduction in supplier’s tax liability.
3. Transaction value stays the same.

Clarification: The Recipient is not required to reverse the ITC

Issue 2: Post-sale discounts by manufacturer to dealer/distributor – Consideration?

Section 2(31) defines “consideration” (includes inducements).

Case 1 - No agreement with end customer:

• Two independent sales (manufacturer → dealer → customer).
• Sale is principal-to-principal basis.
• Discounts merely reduce sale price, not inducement.

Clarification: Not to be treated as consideration.

Case 2-Agreement with end customer:

• Manufacturer agrees to supply goods at discounted price.
• Manufacturer issues credit notes to dealer for passing discount to customer.

Clarification: Such discounts are inducements and must be included in consideration.

Issue 3: Post-sale discount as consideration for promotional activities

Clarification: Not a separate service; no GST.

Exception: GST applies if dealer provides defined promotional services (ads, co-branding, campaigns, exhibitions, customer support) under an agreement with consideration.

CBIC Clarification on Post-Sale Discounts 

• Normal trade discounts for competitive pricing not subject to GST.
• GST applies only if dealers provide defined promotional services (ads, co-branding, campaigns, etc.) under an agreement.
• ITC remains unaffected when financial/ commercial credit notes are issued.

Aim: Reduce disputes, align practice with business reality, and provide compliance clarity.

CBIC on Discounts and  ITC

• Buyers need not reverse ITC on post-sale financial/ commercial credit notes.
• Such notes don’t reduce taxable value or GST liability.
• Normal trade discounts = not services, no GST.
• GST applies only if dealers provide defined promotional services under agreement.

Circular brings clarity, reduces disputes, and aids compliance.

 Resource- CBIC