The Central Board of Indirect Taxes and Customs (CBIC) has issued a new circular (No. 251/08/2025-GST dated 12.09.2025) to provide clarity on the treatment of secondary or post-sale discounts under GST. These clarifications were recommended by the GST Council in its 56th meeting held on 3rd September, 2025.
Input Tax Credit (ITC) on Discounts
Dealers/recipients do not need to reverse ITC if suppliers issue financial/ commercial credit notes. It has been clarified vide circular No. 92/11/2019-GST dated 7th March 2019.
Reason: Such credit notes don’t reduce original transaction value or tax liability.
Post-Sale Discounts – Consideration or Not?
Normal trade discounts given by manufacturers to dealers are not “consideration” for further sales.
They are treated as reduction in sale price, not a payment for services.
Discounts Linked to End Customer Agreements
If a manufacturer has an agreement with an end customer for a discounted price:
- Dealer supplies at discounted rate.
- Such discounts are treated as part of “consideration” (inducement for supply).
Promotional Activities by Dealers
If dealers perform specific activities like:
- Advertising campaigns
- Co-branding
- Special sales drives
- Exhibitions or customer support services
Then GST applies, since these are separate taxable supplies.
This clarification removes ambiguity and aims to prevent legal disputes related to post-sale discounts.
DISCLAIMER:
The information contained herein is in summary form and is prepared based on the provisions of GST and allied laws and as well as related Rules, Circulars, Notifications, Judgments/Orders, Press Releases, Trade Notices etc. therein. For details, please refer to the relevant provisions. While the information is believed to be accurate to the best of our knowledge, we do not make any representations or warranties, express or implied, as to its accuracy or completeness of this information. Readers should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. We accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by any person who relies upon it.
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