The CBIC vide Circular No. 251/08/2025-GST dated 12.09.2025, has issued Clarifications relating to treatment of secondary or post-sale discounts under GST. These changes aim to remove ambiguity and prevent legal disputes regarding post-sale discounts. Earlier, the GST Council in its 56th Council meeting held on 03rd September, 2025 has recommended to provide such clarifications.
The Circular issued key scenarios as under:
A. ITC Reversal on Receipt of Post-Sale Discounts – Whether a dealer/recipient needs to reverse ITC if the manufacturer issues a financial/commercial credit note without tax adjustment.
Clarification – It is clarified that the recipient will not be required to reverse the Input Tax Credit attributed to the discount provided on the basis of financial/ commercial Credit notes issued by the supplier, as there is no reduction in the original transaction value of the supply and accordingly the corresponding tax liability would also not get reduced. Since the supplier’s tax liability and the transaction value remain unchanged, ITC reversal is not required.
This removes uncertainty for dealers and secures their ITC entitlement, provided the supplier does not alter his tax liability.
B. Treatment of Discounts as Consideration for Dealer’s Supply to End Customer – Whether a post-sale discount is effectively a payment from the manufacturer for the dealer’s onward supply to the end consumer.
Clarification – In a principal-to-principal transaction, the dealer becomes the owner of the goods; the discount merely reduces purchase cost and is not an inducement for supply.
Exception: Where the manufacturer has an agreement with the end customer for supply at a concessional rate, and issues credit notes to enable the dealer to pass on such benefit, the discount will be treated as consideration/inducement.
C. Treatment of Discounts as Consideration for Promotional Services – Whether post-sale discounts represent consideration for promotional activities performed by dealers (e.g., sales drives, marketing support).
Clarification – Ordinary discounts are not linked to any independent service; they are merely a reduction in purchase price. Therefore, it is clarified that post-sale discounts offered by manufacturers to dealers in such cases shall not be treated as consideration for a separate transaction of supply of services.
Exception: where a dealer undertakes specific sales promotional activities, such as co-branding, advertisements, exhibitions, or customer support are expressly agreed with defined consideration, GST is payable on such services. In such cases, the dealer provides a distinct service to the supplier, and accordingly, GST would be chargeable.
To read the complete Circular https://taxo.online/wp-content/uploads/2025/09/Cir251-13092025.pdf
