The Central Board of Indirect Taxes and Customs (CBIC) has issued a Circular providing crucial clarifications regarding the treatment of secondary or post-sale discounts under the Goods and Services Tax (GST) regime.
Key Clarifications Provided in the Circular
- Input Tax Credit (ITC) on Financial/Commercial Credit Notes
CBIC reiterated that suppliers may issue financial or commercial credit notes without reducing their original tax liability.
Consequently, recipients who pay a reduced amount due to such credit notes are not required to reverse their ITC, since the transaction value and corresponding tax liability remain unchanged.
- Post-Sale Discounts Between Manufacturer and Dealer
Post-sale discounts offered by a manufacturer to dealers/distributors will not be treated as consideration for the dealer’s supply to the end customer, provided there is no direct agreement between the manufacturer and the end consumer.
Such discounts are considered as price reductions to boost sales and do not amount to an independent service by the dealer.
However, in cases where the manufacturer has a direct agreement with the end customer to supply goods at a discounted rate, and issues credit notes to dealers to honor that agreement, the discount will be treated as part of the overall consideration.
- Promotional Activities and GST Liability
CBIC clarified that general promotional activities undertaken by dealers, which enhance their own sales, cannot be treated as a separate supply of services to the manufacturer. Post-sale discounts in these cases are purely price reductions.
On the other hand, if dealers carry out specific promotional activities such as advertising campaigns, co-branding exercises, special sales drives, or customer support services with explicit contractual agreements and defined consideration, such transactions will be treated as taxable supplies, and GST will apply.
Notification Details
Circular No. 251/08/2025-GST
Date: 12th September, 2025
Read More: Delhi HC Permits GST Dept. To Examine Advocate’s CPU
