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Circular No. 212/06/2024 – GST: Section 15(3) Compliance

by Shakshi Bharti | Jun 26, 2024 | GST, 2024 Circulars, Circulars, Circulars CGST 2024 | 0 comments

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Important Keyword: Circular 212/06/2024-GST, Section 15(3)(b)(ii), Post-sale discount GST, Tax credit note GST, ITC reversal evidence, CA certificate GST, CMA certificate GST, GST discount compliance, Section 34 CGST Act, CBIC Circular 212/06/2024, GST valuation, GST audit documentation,

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F. No. CBIC-20001/4/2024-GST
Government of India
Ministry of Finance
(Department of Revenue)
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****

North Block, New Delhi Dated the 26^th June, 2024

Circular No. 212/06/2024 - GST: Clarification on mechanism for providing evidence of compliance of conditions of Section 15(3)(b)(ii) of the CGST Act, 2017 by the suppliers

To,

The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All)

The Principal Directors General/ Directors General (All)

Madam/Sir,

Subject: Mechanism for providing evidence of compliance of conditions of Section 15(3)(b)(ii) of the CGST Act, 2017 by the suppliers -reg.

In cases where the discounts are offered by the suppliers through tax credit notes, after the supply has been effected, the said discount is not to be included in the taxable value only if the condition of clause (b)(ii) of sub-section (3) of section 15 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), for reversal of the input tax credit attributable to the said discount by the recipient, is satisfied.

Representations have been received from the trade and the field formations mentioning that there is presently no facility available to the supplier as well as the tax officers on the common portal to verify whether the input tax credit attributable to the said discount has been reversed by the recipient or not. Request has been made to provide a suitable mechanism for enabling the suppliers as well as tax officers to verify fulfilment of the condition of section 15(3)(b)(ii) of the CGST Act regarding proportionate reversal of input tax credit by the recipients in respect of such discounts given by the supplier by issuing tax credit notes after the supply has been effected.

In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the CGST Act, hereby clarifies the issues as under:

Section 15 of the CGST Act provides for value of taxable supply of goods or services or both. Sub-section (3) of the said section provides that the value of supply shall not include discount given by the supplier, subject to certain conditions. As per clause (b) of the said sub-section, any discount which is given after the supply has been effected shall not be included in the value of the supply, only if it satisfies the following conditions:

Such discount is established in terms of an agreement entered into at or before the time of such supply;
Such discount must be specifically linked to the relevant invoices
Input Tax Credit attributable to such discount on the basis of document issued by the supplier has been duly reversed by the recipient.

Accordingly, wherever any discount is offered by the supplier to the recipient, by issuance of a tax credit note as per section 34 of the CGST Act, after the supply has been effected, the said discount can be excluded from the value of taxable supply only if the conditions of clause (b) of sub-section (3) of section 15 of the CGST Act are fulfilled. Such conditions inter alia includes the requirement of reversal of input tax credit by the recipient attributable to the said discount.

However, there is no system functionality/ facility presently available on the common portal to enable the supplier or the tax officer to verify the compliance of the said condition of proportionate reversal of input tax credit by the recipient.

In view of the above, till the time a functionality/ facility is made available on the common portal to enable the suppliers as well as the tax officers to verify whether the input tax credit attributable to such discounts offered through tax credit notes has been reversed by the recipient or not, the supplier may procure a certificate from the recipient of supply, issued by the Chartered Accountant (CA) or the Cost Accountant (CMA), certifying that the recipient has made the required proportionate reversal of input tax credit at his end in respect of such credit note issued by the supplier.
The said CA/CMA certificate may include details such as the details of the credit notes, the details of the relevant invoice number against which the said credit note has been issued, the amount of ITC reversal in respect of each of the said credit notes along with the details of the FORM GST DRC-03/ return / any other relevant document through which such reversal of ITC has been made by the recipient.

Such certificate issued by CA or CMA shall contain UDIN (Unique Document Identification Number). UDIN of the certificate issued by CAs can be verified from ICAI website https://udin.icai.org/search-udin and that issued by CMAs can be verified from ICMAI website https://eicmai.in/udin/VerifyUDIN.aspx.

In cases, where the amount of tax (CGST+SGST+IGST and including compensation cess, if any) involved in the discount given by the supplier to a recipient through tax credit notes in a Financial Year is not exceeding Rs 5,00,000 (rupees five lakhs only), then instead of CA/CMA certificate, the said supplier may procure an undertaking/ certificate from the said recipient that the said input tax credit attributable to such discount has been reversed by him, along with the details mentioned in Para 2.5 above.

Such certificates issued by the CA/CMA or the undertakings/ certificates issued by the recipient of supply, as the case may be, shall be treated as a suitable and admissible evidence for the purpose of section 15(3)(b)(ii) of the CGST Act, 2017. The supplier shall produce such certificates/undertakings before the tax officers, if required, during any proceedings such as scrutiny, audit, investigations, etc. Even for the past period, where ever any such evidence as per section 15(3)(b)(ii) of CGST Act in respect of credit note issued by the supplier for post-sale discounts is required to be produced by him to the tax authorities, the concerned taxpayer may procure and provide such certificates issued by CA/CMA or the undertakings/ certificates issued by the recipients of supply, as the case may be, to the concerned investigating/audit/adjudicating authority as evidence of requisite reversal of input tax credit by his recipients.

It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board. Hindi version would follow.

(Sanjay Mangal)
Principal Commissioner (GST)

📚 Frequently Asked Questions (FAQs): Circular No. 212/06/2024 - GST

Q1. What is Circular No. 212/06/2024-GST?

Answer: It provides an interim mechanism for suppliers to prove that recipients have complied with the ITC reversal condition under Section 15(3)(b)(ii) when post-sale discounts are issued through tax credit notes.

Q2. Why is ITC reversal necessary?

Answer: Section 15(3)(b)(ii) requires recipients to reverse the ITC attributable to post-sale discounts before suppliers can exclude those discounts from the taxable value.

Q3. Is a CA certificate mandatory in every case?

Answer: No.
Where the tax involved for a recipient does not exceed ₹5 lakh in a financial year, the supplier may rely on a recipient undertaking instead of a CA/CMA certificate.

Q4. What details should the certificate contain?

Answer: It should include credit note details, invoice references, ITC reversal amounts, return or DRC-03 particulars, and a valid UDIN for CA/CMA certificates.

Q5. Can these documents be used for past assessments?

Answer: Yes.
The circular specifically allows suppliers to produce these certificates or undertakings for past periods during scrutiny, audit, investigation, or adjudication proceedings.

Q6. What is the biggest practical benefit of this circular?

Answer: It provides suppliers with an accepted documentary method to establish compliance until the GST portal introduces an automated verification mechanism.

Conclusion

Circular No. 212/06/2024-GST addresses a long-standing compliance challenge by prescribing a practical mechanism to prove ITC reversal for post-sale discounts. By accepting CA/CMA certificates and, in smaller cases, recipient undertakings, CBIC has given businesses a workable solution until a system-based verification facility becomes available.