The Central Board of Indirect Taxes and Customs (CBIC) has recently issued a circular (No. 251/08/2025-GST, dated 12th September 2025) to clear doubts regarding post-sale or secondary discounts under the Goods and Services Tax (GST). This clarification aims to bring uniformity in tax treatment and avoid confusion among businesses and tax professionals.
1. Input Tax Credit (ITC) on Post-Sale Discounts
When a supplier issues financial or commercial credit notes after a sale, the original tax liability of the supplier does not reduce.
Since the taxable value of supply remains unchanged, the recipient is not required to reverse ITC against such discounts.
In short, dealers can continue to claim full ITC even if they have received post-sale discounts through credit notes.
2. Discounts Between Manufacturer, Dealer, and Customer
In normal cases, the sale from manufacturer to dealer and from dealer to customer are two independent transactions.
Post-sale discounts given by the manufacturer are only for competitive pricing and cannot be treated as an “inducement” or consideration for further sales.
However, if there is a specific agreement with the end customer (for example, goods must be sold at a reduced price), then the discount provided by the manufacturer becomes part of the overall consideration.
3. Discounts vs. Promotional Services
A simple discount given by the manufacturer is not treated as payment for promotional activities done by the dealer.
But, if the dealer performs specific marketing or promotional services like advertising, co-branding, exhibitions, or customer support, and there is a clear agreement with defined payment terms, then such activities will be treated as a separate supply of service and attract GST.
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✅ Key Takeaway:
Dealers can freely claim ITC on post-sale discounts through credit notes.
Normal trade discounts are not treated as service consideration.
Only when dealers provide defined promotional services against payment, GST becomes applicable.
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FAQs on Post-Sale Discounts under GST
Q1. Can a dealer claim full Input Tax Credit (ITC) if a supplier issues a financial or commercial credit note after sale?
Ans: Yes. Since the original taxable value of supply is not reduced by such credit notes, the recipient can claim full ITC. There is no requirement to reverse ITC on account of these post-sale discounts.
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Q2. Are post-sale discounts considered as consideration for the dealer’s supply to customers?
Ans: Generally, no. Discounts offered by manufacturers to dealers are only a way to reduce the price of goods and cannot be treated as an inducement for further sales. However, if the manufacturer has an agreement with the end customer for selling goods at a lower price, such discount will be treated as part of the overall consideration.
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Q3. Do dealers need to pay GST on post-sale discounts?
Ans: No, not in the normal course. Post-sale discounts are not treated as supply of services and hence no GST is payable. But if the dealer performs specific promotional activities (like advertising, branding, exhibitions, etc.) against agreed payment, then GST will apply on those services.
Q4. If a dealer conducts promotional activities using post-sale discount funds, is it taxable?
Ans: Only if the promotional activity is clearly defined in an agreement with the manufacturer as a separate service (for example, advertising campaigns or co-branding). In that case, GST is applicable. Otherwise, normal discounts are outside the scope of GST on services.
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Q5. What is the difference between a financial/commercial credit note and a GST credit note?
Ans:
Financial/Commercial Credit Note: Issued without GST impact, only reduces financial liability between buyer and seller. ITC remains unaffected.
GST Credit Note: Issued under Section 34 of CGST Act to adjust tax liability when value of supply or tax charged is reduced.
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⚖️ Disclaimer: This article is for informational purposes only. Readers are advised to consult the official CBIC circular or a GST professional before taking any decision.