The Goa Finance Department has issued a Circular providing clarification on how discounts should be treated and recorded in tax invoices under the Goa Value Added Tax (GVAT) Act, 2005.

The Finance Department has noticed that some sellers are not correctly showing discounts on their tax invoices under the Goa Value Added Tax Act, 2005. This has confused the buyers while claiming input tax credit (ITC). Therefore, to make things consistent for all businesses, the department released this circular to explain how discounts should be properly recorded in tax invoices.

As per Section 2 (ad) of the Goa Value Added Tax Act, 2005, ‘Sale Price‘ refers to the amount of the goods received or receivable by the seller for selling any goods, excluding any standard cash discounts typically offered in that type of business. However, the sale price must include any extra charges for things the seller does related to the goods before or at the time of delivery.

In case of transfer of property in goods or in some other form involved in the execution of a works contract, the sale price of the goods involved will be determined in a specific way, by deducting the amount from the total consideration value. The amount left after these deductions will be treated as the sale price under this rule.

Similarly, the circular has clarified the meaning of sale. ‘Sale Price ‘ means the actual amount a buyer has paid or has to pay to the seller. Therefore, the VAT is imposed on the sale price of goods or commodities and during the issuance of any tax invoice, the dealers must first subtract any discount (rebate, incentive, or trade discount) from the item’s value. The remaining amount is the net sale price, and VAT is imposed on that at the applicable rate. It is not correct to first apply VAT on the total sale amount and then subtract the discount from the final invoice total, as this does not follow the rules of the GVAT Act, 2005, and the GVAT Rules, 2005.

Refer to the official circular for more information.