We have small doubts on GST, Please resolve the following issues by quoting relevant sections/notifications/circulars for record filing purpose

1. We are selling goods at a price less than the purchase price – Please comment what are the consequences that we have to be faced with the GST department at the time of GST Audit.

2. As a dealer, we have to sell the goods at discounted price as per the schemes informed to us by the manufacturer and the same will be reimbursed to us as discount from time to time. My query is that we are showing scheme offers as discount in the invoice and charging GST on net Taxable amount (I.e Sale price- discount (i.e scheme offer) = net Taxable value ) . The discount amount (i.e scheme offer) passed on to customer will be reimbursed by the manufacturer by way of discount and the same was reflected in their account statement. Please clarify whether we have to pay gst or not on discount amount (i.e. scheme offer) received from the manufacturer because the manufacturer had not paying any GST to us and also clarify whether we have to face any difficulties at the time of GST Audit carried by the GST department.

Reply:- Section 15 of the CGST Act deals with value of supply, which incorporated the effect of discounts on value of supply and consequent reversal of ITC at the recipient end. The relevant provisions of section 15(3) are as under:-

(3) The value of the supply shall not include any discount which is given––

(a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and

(b) after the supply has been effected, if—

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

There is no consequences if you sell the goods at a price less than the purchase price. As far as post sale discount is concerned, you have to confirm whether your manufacturer is entering the credit note in his GSTR-1. In this case the portal will automatically reduce your input tax credit. If the manufacturer is not entering the credit note in GSTR-1 then it is a commercial credit note and it will not affect your taxability. Please refer circular number 92/11/2019-GST Dated: 7th March, 2019.