Goods And Service Tax India

Strange, but true.

The Commercial Tax Authorities have been contending that discount received should be treated as turnover and that the dealer should pay tax thereon.

I am unable to find any provision in the Act or the Rules that supports the contention of the authorities.

Sec 2(xliv) defines “sale price” as the consideration received less any discount allowed.

Explanation III(ii) to Sec 2(lii) says that any discount allowed shall not be included in the turnover where such discount is shown separately in the invoice.

Second Proviso to Sec 11(3) says that where goods are sold at subsidised prices, the input tax shall not exceed the output tax.

Fifth Proviso to Sec 11(3) says that input tax credit shall not be available in respect of the tax paid on the turnover subsequently allowed as discount.

The provisions can thus be summarised as follows:
1) Discount allowed in the invoice shall not be included in the turnover and conversely, no deduction will be available to seller for discounts allowed through credit notes.
2) Where the sale price is below cost, the input tax shall be limited to the output tax and the excess input tax shall be reversed.
3) The seller is not allowed to revise the monthly return to claim a higher deduction for discounts allowed subsequently [Rule 9(5)]

If the purchaser sells the goods below the purchase price, the excess of input tax over the output tax shall be reversed. There is no provision to treat the credit note received from the supplier as turnover.

If the goods are sold at a profit and subsequently the supplier issues a credit note for reasons ranging from liquidation of slow moving goods to incentive for achieving turnover targets, such credit notes cannot be treated as turnover.

I hope the Commissioner, Commercial Taxes, Kerala will issue suitable guidelines to the Assessing Officers including those in Audi Assessment wing so that the dealers are not put to undue difficulties.