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Circular No. 251/08/2025-GST
F. No CBIC-20001/3/2025-GS-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 12th September, 2025
To,
The Principal Chief Commissioners/ Chief Commissioners of Central Tax (All)
The Principal Director Generals/ Director Generals (All)
Madam / Sir,
Subject: Clarification on various doubts related to treatment of secondary or post-sale
discounts under GST - reg.
Representations have been received seeking clarifications in respect of tax treatment in cases
of secondary discounts or post-sale discount.
2. The matter has been examined. In order to ensure uniformity in the implementation of the law
across the field formations, the Board, in exercise of its powers conferred under sub-section (1) of
section 168 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the CGST
Act”) clarifies the issues as under.
S. No.
Issue
Clarification
1. Whether the full input tax credit is
available to the recipient of supply
when the recipients make discounted
payments to the supplier of goods on
account of financial/ commercial credit
notes issued by the said supplier?
1. Section 16 (1) of the CGST Act, 2017
provides that every registered person
shall be entitled to take credit of input
tax charged on any supply of goods or
services or both, which are used or
intended to be used in the course or
furtherance of his business.
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2. It has been clarified vide circular No.
92/11/2019-GST dated 7th March 2019
that the supplier of goods can issue
financial/ commercial credit notes and in
such cases, he will not be eligible to
reduce his original tax liability. As the
transaction value is not allowed to be
reduced on account of issuance of
financial/
commercial
credit
note,
accordingly the tax charged from the
recipient would also not get reduced.
3. Thus, 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.
2.
Whether a post-sale discount offered
by a manufacturer to its dealer/
distributor, would be treated as a
consideration paid by the manufacturer
for the dealer’s supply of the same
goods to the end customer as a
monetary value of the inducement to
supply of goods manufactured by him
to the end customer?
1. Section 2 (31) of the CGST Act, 2017
defines consideration as to include the
monetary value of any act for the
inducement of the supply of goods or
services, whether by the recipient or by
any other person.
2. In cases where there is no agreement
between the manufacturer and the end
customer, there are two independent sale
transactions, one from the manufacturer
to the dealer and the other from the dealer
to the end customer. The essence of the
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matter is that in a contract of sale, the sale
is completed on the transfer of title to the
goods to the buyer. Once this happens,
the buyer becomes the owner of the
goods, and the seller has no vestige of the
title or claims therein. The dealer takes
ownership of the goods purchased from
the manufacturer and subsequently sells
them to the end customer and transaction
between the manufacturers to dealer
operates on a principal-to-principal basis.
These discounts are simply given for
competitive pricing to push sales and
merely reduce the sale price of the goods
and are not linked to any independent
activity rendered to the manufacturer.
Therefore, it is clarified that such a
discount
cannot
be
included
in
consideration as the monetary value of
the inducement of further supply of these
goods.
3. However, in cases where the manufacturer
has some agreement with an end
customer to supply goods at a discounted
price, the manufacturer may issue
commercial or financial credit notes to
the dealer, enabling such dealer to
provide the goods at the agreed
discounted rate to the end consumer.
Therefore, it is clarified that such a post-
sale discount, given by the manufacturer
to the dealer for supplying goods to the
end customer at a discounted rate, should
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be included in the overall consideration
as it is an inducement towards the supply
of goods by the dealer to the end
customer.
3.
Whether a post-sale discount extended
by the manufacturer to the dealer can
be treated as a consideration in lieu of
the activities performed to promote
the sale of the goods?
1. The matter has been examined. When
dealers receive such post-sale discounts,
they
may
engage
in
promotional
activities to boost sales. However, these
activities ultimately enhance the sale of
goods that the dealers themselves own,
thereby increasing their own revenue. In
this context, the discount merely reduces
the sale price of the goods and is not
linked to any independent service
rendered to the manufacturer. 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.
2. However, GST would be leviable in
cases where a dealer undertakes specific
sales promotional activities, such as
advertising
campaigns,
co-branding,
customization services, special sales
drives,
exhibition arrangements, or
customer support services, etc., only
when such services are explicitly stated
in the agreement with a clearly defined
consideration payable for such a supply.
In such cases, the dealer provides a
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distinct service to the supplier, and
accordingly, GST would be chargeable.
3. It is requested that suitable trade notices may be issued to publicize the contents of this circular.
4. Difficulty if any, in the implementation of this circular may be brought to the notice of the
Board.
Yours faithfully,
(Gaurav Singh)
Commissioner (GST)
