CBIC has issued GST Circular 212/6/2024 providing relief thru a mechanism for business providing their customers post-sale discounts. This circular suggests the kind of proof that must be collected for these transactions for compliance with Section 15(3)(b)(ii) of the CGST Act, 2017. (Withdrawn vide Circular 253/10/2025)
You might already know that post-sales discount, typically through a tax credit note, can be excluded from your taxable value. But this is only possible if you meet specific conditions. One of the most critical conditions has always been that your customer must reverse the input tax credit they originally claimed on that discounted amount.
The big problem for suppliers has been verification. How can you, as a supplier, prove to a tax officer that your customer actually reversed that ITC? There simply hasn’t been a facility on the common GST portal to check this. This created a lot of uncertainty and risk during audits or investigations.
Recognizing this gap, the new circular lays out a temporary mechanism for providing evidence. It is a practical solution while we wait for a permanent online functionality to be developed.
So, what does this mean for you as a supplier? Essentially, you now need to get a specific document from your customer. The type of document depends on the total tax value of the discounts you have given them in a financial year.
For larger amounts, where the total tax involved in all your credit notes to a single recipient exceeds Rs 5 lakh in a year, you must get a certificate from their Chartered Accountant or Cost Accountant. This certificate must confirm that the recipient has made the required proportionate reversal of ITC.
This professional certificate should include all the important details. Think of things like the credit note numbers, the original invoice numbers they relate to, the exact amount of ITC reversed, and which form or return was used to make the reversal, like a DRC-03. Crucially, the certificate must also have a UDIN, a Unique Document Identification Number, which you can verify online on the ICAI or ICMAI websites.
For smaller amounts, where the total tax on these discounts is Rs 5 lakh or less for a recipient in a year, the rules are a bit simpler. Instead of a CA or CMA certificate, you can accept a formal undertaking or a certificate directly from the customer. This document should contain all the same details about the credit notes and the ITC reversal.
It is crucial that you realize these certificates and undertakings are now officially recognized as evidence. You should keep them stored in an accessible location and be prepared to show them to a tax officer if they require them in any investigation, audit, etc.
This new instruction is not only relevant to future operations but also to past transactions. In case you had issued credit notes for post-sale discounts and now need to furnish evidence for them, you can request and collect these certificates or undertakings from your customers to satisfy the tax officers.
Essentially, this circular provides the suppliers with an unambiguous and approved mode to demonstrate that they have fulfilled the requirements for post-sale discounts. Be sure to revise your procedures to begin obtaining the correct documentation from your clients. This is a small measure that can protect you from conflict with the authorities in the future.
CBIC GST Circular 212/6/2024 dated 26/06/2024: Mechanism for providing evidence of compliance of conditions of Section 15(3)(b)(ii) of the CGST Act, 2017 by the suppliers (Withdrawn vide Circular 253/10/2025)