Businesses get relief as CBIC eases input tax credit rules

Businesses receiving post-sale discounts in the form of financial or commercial credit notes without tax adjustments do not need to reverse input tax credit (ITC), the Central Board of Indirect Taxes and Customs (CBIC) has said in a circular.

CBIC issued the circular to clarify rules on post-sale discounts under the goods and services tax (GST) regime with an aim to reduce uncertainty and disputes.

The circular said discounts provided by the manufacturer to the dealer, intended solely for competitive pricing and sales promotion, are not a consideration for any independent service.


This has been a pain point for many businesses.

However, the circular clarified that GST will be applicable only on promotional activities like co-branding, advertising campaigns, or sales drives when there is a separate agreement with clearly defined consideration.

The move follows a recommendation by the GST Council and is expected to provide clarity to businesses on ITC entitlement and tax liability.