Circular No. 251/08/2025-GST, Dated 12-09-2025
1. Introduction
The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular to provide much-needed clarity on the treatment of post-sale discounts under GST. This step was taken after receiving several representations from industry stakeholders regarding the tax implications of secondary or post-sale discounts extended by suppliers to dealers.
2. Clarification on Input Tax Credit (ITC)
One of the key issues addressed by the CBIC relates to Input Tax Credit (ITC). The circular clarifies that the recipient will not be required to reverse the ITC corresponding to the discounts provided through financial or commercial credit notes. This is because such discounts do not alter the original transaction value of the supply, and therefore, the supplier’s tax liability remains unchanged.
3. Treatment of Post-Sale Discounts
The CBIC has further explained that post-sale discounts offered by manufacturers to dealers will not be treated as consideration for a separate supply of services. This means that routine discounts passed on after the sale—without any additional obligations—are simply commercial adjustments and will not attract GST.
4. Exceptions for Promotional Activities
However, the circular also highlights exceptions. Where a dealer is required to perform specific promotional activities such as advertising campaigns, co-branding initiatives, customization services, special sales drives, exhibition arrangements, or customer support services, these would constitute a separate supply of services. In such cases, GST will be levied, but only if the services are explicitly mentioned in the agreement with a clearly defined consideration.
5. Conclusion
The CBIC’s clarification resolves long-standing confusion around the GST treatment of post-sale discounts. By distinguishing between routine commercial discounts and services linked to promotional activities, the circular ensures greater transparency and compliance. This move is expected to provide relief to manufacturers and dealers while aligning practices with the principles of GST law.
