Tax treatment of discount is the most critical area of the discount saga. Discount is generally given by the supplier to boost his
sales. Different types of discount prevails in the business like general
discount, turnover discount, cash discount etc.
Most preferred and litigation free way of showing discounts is to show the
same on the invoice but due to commercial reasons, it may not be possible to
show all discounts on the invoice itself and the problem actually starts there.
Tax Authorities does not want to reduce discount from taxable value except
when such discount shown in invoice itself while tax payer claim that he has
never received the consideration thus it must be reduced. Honourable courts
held in many cases that showing discount invoice is not solution to pass
discount to customer and arrive the taxable value.
Recently GST wing of CBIC has issued a circular clarifying various issue on
discount and its taxability under GST however before going into discussion of
circular it would be better to look provisions of CGST Act,2017
Section 15 of the Act deals with
valuation of supply in which reference of discount is found under sub section
(3) of the said section, which states as under:-