Clarification on Discounts and Tax Credit Notes under CGST Act

Discounts and Taxable Value: Discounts given after supply are excluded from taxable value only if ITC (Input Tax Credit) attributable to the discount is reversed by the recipient as per section 15(3)(b)(ii) of the CGST Act. Verification Issue: There is no portal functionality for suppliers or tax officers to verify if the recipient has reversed the ITC for such discounts.

Supplier Responsibility: Suppliers must ensure ITC reversal by the recipient to exclude the discount from the taxable value. Procuring Certificates: Suppliers should obtain a certificate from the recipient, issued by a Chartered Accountant (CA) or Cost Accountant (CMA), confirming the ITC reversal.

Certificate Details: The CA/CMA certificate should include credit note details, relevant invoice numbers, the amount of ITC reversal, and the document used for reversal (e.g., FORM GST DRC-03). Small Amounts: For discounts with tax not exceeding Rs 5,00,000 in a financial year, an undertaking/certificate from the recipient confirming ITC reversal is sufficient.

Evidence for Tax Officers: These certificates or undertakings are valid evidence for tax officers during scrutiny, audits, or investigations. Past Periods: For past transactions, similar certificates or undertakings can be provided to tax authorities as proof of ITC reversal for post-sale discounts.