No GST ITC Reversal required in case Financial Credit Note is issued by the supplier: AAR

The Applicant purchases various electronic Items from M/s Gold Medal Electricals Private Limited.

The supplier issued a Tax Invoice and charged GST on such taxable value, calculated In terms of Section 15 of CGST Act, 2017. The applicant submits that, the supplier has paid GST and filed GSTR3B for the relevant.

Applicant has received the goods and made the payment or consideration as per tax invoice for the goods received from the supplier.

The applicant has received various incentives, in the nature of “discounts” from its supplier, viz. Turnover Discount, Quantity Discount, Cash Discounts, Additional Scheme Discounts, 3 Months regular scheme discounts, etc. year wise from effective date of registration till date. All the above discounts are in the form of after sale discounts. For the above-mentioned discounts, the supplier has raised financial/ commercial credit note without GST for accounting purpose only. The financial Credit Notes were accounted for by the Applicant and also disclosed by distributors in their Income Tax returns. Further, supplier does not reduce its output tax liability in respect to said Financial/commercial Credit Notes, as Section 15 doesn’t permit to exclude “Post Supply Discount” from transaction value. Supplier also filed affidavit stating that they don’t reduce GST liability on account of financial/commercial credit note.

The Following questions have been seeked by the Applicant:

1. Whether the applicant is duly eligible to take full credit of GST Charge in Tax invoice issued by supplier and GST was paid by such supplier to the government even though later commercial/ financial credit note is issued for part amount of invoice.

2. Whether the applicant is required to reverse the ITC proportionately to the extent of financial/ commercial credit note issued by supplier.

Advance Ruling:

1. Affirmative

2. Negative, provided the dealer pays the value of the supply as reduced after adjusting the amount of post-sale discount in terms of financial/ commercial credit notes received by him from the supplier of goods plus the amount of original tax charged by the supplier.