Part-1- Secondary Discounts-Discount by Way of Credit Note issued under Sec 34 and Secondary Discounts-Discount by Way of Financial Credit Note
Reference-1-Circular No. 92/11/2019-GST Dated 7th March 2019 –Secondary Discounts-Discount by Way of Credit Note issued under Sec 34
These are the discounts which are not known at the time of supply or are offered after the supply is already over. For example, M/s A supplies 10000 packets of biscuits to M/s B at Rs. 10/- per packet. Afterwards M/s A re-values it at Rs. 9/- per packet. Subsequently, M/s A issues credit note to M/s B for Rs. 1/- per packet.
It is further clarified that such secondary discounts shall not be excluded while determining the value of supply as such discounts are not known at the time of supply and the conditions laid down in clause (b) of sub-section (3) of section 15 of the said Act are not satisfied.
In other words, value of supply shall not include any discount by way of issuance of credit note(s) as explained above in para 2 (D)(iii) or by any other means, except in cases where the provisions contained in clause (b) of sub-section (3) of section 15 of the said Act are satisfied.
Refernce-2- Circular No. 92/11/2019-GST Dated 7th March 2019 –Secondary Discounts-Discount by Way of Financial Credit Note
There may be cases where post-sales discount granted by the supplier of goods is not permitted to be excluded from the value of supply in the hands of the said supplier not being in accordance with the provisions contained in sub-section (3) of section 15 of CGST Act.
Supplier: It has already been clarified vide Circular No. 92/11/2019-GST dated 7th March, 2019 that the supplier of goods can issue financial / commercial credit notes in such cases but he will not be eligible to reduce his original tax liability.
Dealer: It is clarified that the dealer will not be required to reverse ITC attributable to the tax already paid on such post-sale discount received by him through issuance of financial / commercial credit notes by the supplier of goods in view of the provisions contained in second proviso to sub-rule (1) of rule 37 of the CGST Rules read with Circular No. 105/24/2019-GST second proviso to sub-section (2) of section 16 of the CGST Act as long as 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.
Refernce-3-Ultratech Cement Ltd.  95 Taxmann.com 289 (AAR -Maharashtra)
Query: Whether the amount paid to dealer towards “rate difference” post supply can be considered for the purpose of arriving at the ‘transaction value’ in terms of Section 15 of the Central Goods and Services Tax Act (“CGST Act”).
Held: The wordings of Section 15(3)(b)(i) very clearly states that quantum of discount is given after the supply of goods has taken place has to be there in the terms of such agreement i.e. it cannot be open ended not based on any criteria. Thus this discount quantum cannot be arrived at without any basis only at the discretion of the supplier. The supplier has to clearly mention the quantum of discount or percentage of discount which is to be worked out on the basis of certain parameters or certain criteria which may be agreed to between the supplier and the recipient and which are predetermined and mentioned in agreement in respect of supply of the goods.
Thus the bare word ‘discount’ mentioned in such an agreement without there being any parameters or criteria mentioned with it would not fulfil the requirement of Section 15(3)(b)(i) of the CGST Act, as the word ‘discount’ if left open ended or without any qualifications or criteria attached can mean there can be any percentage of discount ranging from bare minimum to even 100% as per discretion of the supplier and certainly such abnormal discounts without any criteria or basis can in no way be considered as fair and at arm’s length business transactions and no taxation statute can be construed to be having open ended discount with legislative intent.
Reference-4-MRF Ltd.  108 taxmann.com 65 (AAAR – TAMILNADU)
For the reasons stated in the Statement of Facts, the post-purchase discount extended by the supplier is not an allowable deduction under Section 15(3) since the requirements of the said provisions are not satisfied. Hence, GST is payable by the Supplier on the entire price of the goods. Once the entire price is treated as transaction value for the purpose of Section 15, such value should be treated as being paid even for the purpose of section 16(1) Proviso 2. This is for the reason that the term ‘the value of supply’ in Proviso 2 to Section 16 has to be read in harmony with the same term mentioned in Section 15. Therefore the payment made by the company has to be construed as proper payment in compliance with Section 16(2) of the Act though there is an actual lower payment by them to the Supplier of the goods.
Reference-5- Rajkot Nagarik Sahakari Bank Ltd.  108 taxmann.com 515 (AAR – GUJARAT)
In the facts and circumstances of the case, whether first 10 free transactions subject to maximum of rupees 5 Lakh allowed to the Demat account holder depositing Refundable interest free deposit would attract GST? It appears from the above that the first 10 free transaction allowed to the demat account holders are in the nature of discount and will not attract GST subject to the fulfilment of the conditions prescribed under Section 15(3) of the CGST & GGST Act.
Part-2-Additional discount given by way of post sale incentive like special sales drive, advertisement campaign, exhibition etc.
Reference-1-Circular No. 105/24/2019-GST Dated 28th June 2019 (Withdrawn)
If the additional discount given by the supplier of goods to the dealer is the post-sale incentive requiring the dealer to do some act like undertaking special sales drive, advertisement campaign, exhibition etc. Such transaction would be a separate transaction and the additional discount will be the consideration for undertaking such activity and therefore would be in relation to supply of service by dealer to the supplier of goods.
Dealer: The dealer, being supplier of services, would be required to charge applicable GST on the value of such additional discount.
Supplier: Supplier of goods, being recipient of services, will be eligible to claim input tax credit of the GST so charged by the dealer.
Reference-2-Agenda to 37th GST Council meeting held on September 20, 2019
Question-Whether the post-sales discount offered by the manufacturer to the dealer shall be treated as a consideration for a separate transaction of supply of services by the dealer to the manufacturer in all the cases?
Answer-A post-sale discount (in form of a credit note) passed on for compensating the dealer to undertake activities (on the directions of the principal supplier) like advertisement campaign, free gifts given along with the principal supply, exchange bonus and the like activities on the directions of the principal supplier, where the dealer may or may not have also contributed, would be treated as a consideration for a ‘separate transaction” in the nature of promotional activities (referred to as ‘business auxiliary services’ in the Service Tax regime) provided by the dealer to the principal supplier. The same would be chargeable to tax separately and the principal supplier would be eligible to avail ITC of the same. Any quantity discount known at the time of supply but which are linked to volume of supplies in specified period arrived at after the supplies have been made, aren’t covered as a consideration for undertaking sales promotion activities and eligible for tax adjustment as provided in Section 15(3)(b) of the CGST Act ,2017. The tax treatment of such a discount would remain the same even if the dealer undertakes a promotional activity to achieve the requisite sales volumes, the same being on his own account and not being on the directions of the principal supplier.
Reference-3-Kwality Mobikes (P.) Ltd  110 taxmann.com 369 (AAR – KARNATAKA)
4.1 The transaction of the applicant is examined and found that the authorised supplier is issuing a tax invoice on the supply of goods to the applicant and the applicant is taking credit of the input tax charged in the invoice. The applicant when makes more purchases is eligible for the volume discount on purchases and a credit note is issued by the authorised supplier and no adjustment of price is made in respect of the goods already sold nor any adjustment of GST is made in the credit note. The applicant is also not claiming any reduction in input tax credit already claimed by him as it does not affect the price of the goods sold. Hence, the amount received by the applicant is in the form of an incentive provided by the authorised supplier and does not affect the sale price of the goods already sold and hence there is no liability to charge GST on the same.
4.2 Further, the applicant when sells more than his target is eligible for the incentive which is provided by the authorised supplier in the form of a credit note without affecting the sale price of the goods purchased or sold. Even this is in the form of incentive and no adjustment of price nor tax is done either by the applicant or the authorised supplier. Hence, the amount received by the applicant is in the form of an incentive provided by the authorised supplier and does not affect the sale price of the goods already sold and hence there is no liability to charge GST on the same.
4.3 Further, the applicant is not providing any service to the authorised supplier and is only receiving the incentive. Indirectly, it has an effect on the sale price of the goods purchased by the applicant from the authorised supplier and is actually in the form of discount.
Part-3–Additional discount given to the dealer to offer a special reduced price to the customer to augment the sales
Reference-1-Circular No. 105/24/2019-GST Dated 28th June 2019 (Withdrawn)
If the additional discount is given by the supplier of goods to the dealer to offer a special reduced price by the dealer to the customer to augment the sales volume Such additional discount would represent the consideration flowing from the supplier of goods to the dealer for the supply made by dealer to the customer.
Dealer: This additional discount as consideration, payable by any person (supplier of goods in this case) would be liable to be added to the consideration payable by the customer, for the purpose of arriving value of supply, in the hands of the dealer, under section 15 of the CGST Act.
Customer: The customer, if registered, would be eligible to claim ITC of the tax charged by the dealer only to the extent of the tax paid by the said customer to the dealer in view of second proviso to sub-section (2) of section 16 of the CGST Act.
Reference-2-Agenda to 37th GST COUNCIL meeting held on September 20, 2019 – Why the circular was withdrawn
Will the post-sale discount given by the manufacturer to the dealer impact the valuation of the subsequent supply by the dealer to the customer?
In terms of sub-section (1) of section 15 of the CGST Act when the supplier of the goods and the recipient are not related and price is the sole consideration for the supply, the value of the supply of goods shall be the transaction value, which is the price actually paid or payable for the said supply.
2. The post-sale discount offered by the manufacturer to the dealer shall only be relevant for the valuation of supply between the manufacturer and the dealer and will not impact the valuation of the subsequent supply by the dealer(s) to the customer in any manner. However, it is clarified that if the reimbursement or payment for the inducement of the supply (by the dealer to the end customer at a reduced rate) is received from ‘any other person’ (other than the customer) it shall still form a part of the consideration for the value of the supply to the customer in view of the definition of ‘consideration’ in Section 2(31) of the CGST Act, 2017.
Reference-3-Santhosh Distributors, In re  110 taxmann.com 496 (AAR – KERALA)
Supplier not eligible to reduce its Tax Liability since he is not satisfying conditions as prescribed under Section 15(3)(b) and since output liability not reduced by supplier on it’s invoice, therefore applicant not liable to reduce to Input Tax Credit: The value of taxable supply is governed by the provisions of Section 15 of the CGST/SGST Act. The deduction of discounts from the value of taxable supply is subject to the conditions prescribed in sub-section (3) of Section-15 ibid. In the case of the applicant the supplier of goods/principal company is issuing Commercial Credit Notes for reimbursement of the scheme discount provided by the applicant to the customer as per instructions of the supplier. Since the commercial credit notes issued by the supplier/principal company do not satisfy the conditions prescribed in sub-section (3) of Section 15 of the CGST/SGST Act; the supplier is not eligible to reduce the original tax liability. The applicant will not be required to reverse proportionate input tax credit.
Taxability of Additional Scheme given by the Applicant to its dealers on the instruction of M/S Castrol India and in turn reimbursed to the applicant by M/S Castrol India In the facts of the instant case, the additional discount/reimbursed amount represents the consideration flowing from the supplier of goods/principal company to the applicant for the supply made by the applicant to the customers. The additional discount/reimbursed amount; is therefore liable to be added to the consideration payable by the customer to the applicant for the purpose of arriving at the value of supply of the applicant to the customer as per provisions of Section 15 of the CGST/SGST Act. Further, the customer, if registered, would only be eligible to claim ITC of the tax charged by the applicant only to the extent of the tax paid by the said customer to the applicant in view of second proviso to section 16(2) of the CGST/SGST Act.
Our Comment-(In our opinion the decision reflects the position prior to withdrawal of circular No 105/24/2019-GST Dated 28th June 2019)
Part-4- Free samples and gifts
Reference-1-Circular No. 92/11/2019-GST Dated 7th March 2019
Goods or services or both which are supplied free of cost (without any consideration) shall not be treated as “supply” under GST (except in case of activities mentioned in Schedule I of the said Act). Accordingly, it is clarified that samples which are supplied free of cost, without any consideration, do not qualify as “supply‟ under GST, except where the activity falls within the ambit of Schedule I of the said Act
Eligibility of ITC: Thus, it is clarified that input tax credit shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration. However, where the activity of distribution of gifts or free samples falls within the scope of “supply‟ on account of the provisions contained in Schedule I of the said Act, the supplier would be eligible to avail of the ITC.
Part-5- Buy one get one free offer
Reference-1-Circular No. 92/11/2019-GST Dated 7th March 2019
In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one.
Taxability of such supply will be dependent upon as to whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of section 8 of the said Act.
It is also clarified that ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to supply of goods or services or both as part of such offers.
Refeence-2-Golden Tobcco Ltd.  106 taxmann.com 409 (AAR – MAHARASHTRA)
From a reading of the above Circular and the facts of the matter i.e. the facts of the promotion scheme proposed by the applicant we find that their scheme of Buy 100 Get 10 free OR “Buy 1000 Get 150 free” is clearly covered by Para B of the said Circular. Hence in such cases it will not be an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one. In the case of Buy 100 Get 10 free it will be 2 individual supplies, each of 100 packs and 10 packs for the price of 100 packs. In such a case taxability of such supply will be dependent upon as to whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of Section 8 of the said Act. Further, ITC shall also be available to the supplier for the inputs, input services and capital goods used in relation to supply of goods or services or both as part of such offers.
Part-6- Discounts including ‘Buy more, save more’ offers
Reference-1- Circular No. 92/11/2019-GST Dated 7th March 2019
Staggered discount to his customers (increase in discount rate with increase in purchase volume). For example- Get 10 % discount for purchases above Rs. 5000/-, 20% discount for purchases above Rs. 10,000/- and 30% discount for purchases above Rs. 20,000/-. Such discounts are shown on the invoice itself.
Some suppliers also offer periodic / year ending discounts to their stockists, etc. For example- Get additional discount of 1% if you purchase 10000 pieces in a year, get additional discount of 2% if you purchase 15000 pieces in a year. Such discounts are established in terms of an agreement entered into at or before the time of supply though not shown on the invoice as the actual quantum of such discounts gets determined after the supply has been effected and generally at the year end. In commercial parlance, such discounts are colloquially referred to as “volume discounts”. Such discounts are passed on by the supplier through credit notes.
It is clarified that discounts offered by the suppliers to customers (including staggered discount under „Buy more, save more‟ scheme and post supply / volume discounts established before or at the time of supply) shall be excluded to determine the value of supply provided they satisfy the parameters laid down in sub-section (3) of section 15 of the said Act, including the reversal of ITC by the recipient of the supply as is attributable to the discount on the basis of document (s) issued by the supplier
Reference-2- Biostadt India Ltd  103 taxmann.com 127 (AAR – MAHARASHTRA)
In the present scenario we will try to understand the word ‘gift’ in the common parlance as it is also used in the present day. There are several schemes advertised in the market by business houses which promise to give ‘assured gifts’ to their customers, for e.g. In the city of Mumbai and its suburbs various builders had floated advertisements stating that the first x numbers of buyers of flats in their residential construction projects would be give a car/100gms. Gold coins, etc. Similarly malls in Mumbai also offer assured gifts on purchase above certain amounts by their customers. Hence in the present context the word ‘gift’ has an enlarged scope according to us and has its own colour. In all such cases, as in the present case, the statement that goods, in this case gold coins, will be given to customers who satisfy certain conditions is nothing but assurance of giving away gifts on those conditions being achieved by the customers. Under the GST laws the intention for non-granting/denial of set off is envisaged in situations where there is no tax on output supply. In cases where the goods are procured with levy of input tax and are supplied without tax being paid on such output supplies, the scheme of the GST Act provides no input tax credit, except export.
We now deal with one of the contention of the applicant that they have a contractual arrangement with the customer wherein if the distributor purchases certain amount of company’s product or makes payment in a prescribed manner, then he shall be entitled to a gold coin of specific weight.
This can be inferred as if the distributor of the applicant is providing services of increased sale for which consideration is in the form of a gold coin. As per Section 7 of the CGST Act, disposal, or the case may be, barter, made or agreed to be made for a consideration in the course or furtherance of business is supply liable to tax. We find in the present application, the applicant has not shown proof of payment of output tax. The only conclusion that can be drawn in the present case is that the distribution of gold coins by the applicant is not but gifts and hence the transaction is covered by the provisions of Section 17(5) of the Act.
To sum up ITC on “gifts” will not be available when no GST is being paid on their disposal. Just because the applicant submits that they have satisfied Section 16(1) of the CGST Act, 2017 does not mean that they are entitled to credit since Section 17(5) starts with “Notwithstanding anything contained in sub-section (1) of Section 16 ………..”. The implication is that in the subject case even if it seems, as per the applicant that Section 16(1) is applicable in their case and allows them credit, Section 17(5) shall block such credits.