Discount as an additional consideration! Kerala AAAR re-ignites an age-old dispute

Article by Rahul Jain, Joint Partner, Lakshmikumaran & Sridharan, and Raghav Rajeev Associate, Lakshmikumaran & Sridharan

The concept of discounts has always been associated with sales. The same has been used by businesses, both large and small to increase the revenue. Such discounts on most occasions are given directly and at the behest of the manufacturers. In supply structures involving a manufacturer, a distributor and a dealer/customer, discounts are generally routed through the distributor and can partake two forms i.e., pre-supply and post supply discounts.

The position on taxability of pre-supply discounts is largely clear. Such discounts are explicitly mentioned in the invoice and are excludable from the value of supply in accordance with Section 15(3) of the Central Goods and Services Tax Act, 2017 (“CGST Act”). However, disputes continue to exist on the treatment of post-supply discounts, which have been a bone of contention in the erstwhile regime as well.

The current article proposes to examine an interesting proposition which has arising out of the decision of the Kerala Appellate Authority of Advance Ruling (“AAAR”) in Santhosh Distributors1 This case examined the GST implications of post supply discounts routed through a supply chain involving a manufacturer, a distributor, and a dealer.

Click Here to Read the Full Article.