The Finance Ministry set November 1 to implement new post-sale discount rules and 90% provisional refunds for inverted duty structures. Rahul Shekhar said, “The amendment is expected to bring relief to industries such as FMCG, pharma, retail, consumer durables.” These changes simplify tax processes and help businesses manage dealer incentives.
The Finance Ministry has set November 1 as the date for implementation of Finance Act provisions related to post-supply discounts, provisional refunds under the inverted duty structure, and removal of the ₹1,000 minimum refund threshold for export of goods made with payment of tax.
These changes are being brought through amendment in GST Act, prescribed in the Finance Act, 2026.
A key change is related to post-supply discounts. Earlier, exclusion of post-supply discounts from the value of taxable supply was subject to prescribed conditions, including the requirement that such discounts should have been established under an agreement entered at or before the time of supply, and specifically linked to the relevant invoices. Further, the recipient was required to reverse the ITC attributable to such discounts. These conditions frequently created practical difficulties for manufacturers, distributors, dealers, wholesalers and other businesses offering turnover-based incentives, performance-linked rebates, sales-target discounts and other post-sale commercial incentives.
Now, an amendment removed the requirement of establishing such discounts through an agreement entered at or before the time of supply. Accordingly, post-supply discounts may now qualify for exclusion from the value of supply where the supplier issues a credit note and the recipient reverses the attributable input tax credit in accordance with Section 34 of the CGST Act, 2017.
Further, Section 34(1) of the CGST Act, 2017 has also been amended to recognise credit notes issued in respect of discounts covered under Section 15(3)(b), thereby aligning the credit note provisions with the valuation mechanism under the GST law.
Relief to industries
According to Rahul Shekhar, Partner - Indirect Tax, Nangia Global, businesses can now issue GST credit notes for eligible post-sale discounts, subject to the recipient reversing the corresponding ITC. The change will enable businesses to offer discounts to dealers to drive sales while also availing the benefits associated with credit notes. Previously, in the absence of a clearly documented agreement, the issuance of such credit notes resulted in an additional cost to the business. “The amendment is expected to bring relief to industries such as FMCG, pharma, retail, consumer durables, where dealer incentives and volume-based discounts are common,” he said.
Meanwhile, November 1 will also be the date to implement amendment in the law to ensure faster refunds for eligible businesses facing an inverted duty structure. An inverted duty structure generally arises where the tax rate on inputs is higher than the tax rate on outward supplies, resulting in accumulation of unutilised input tax credit.
Prior to the statutory amendment, Section 54(6) principally provided for provisional sanction of 90 per cent of the refund amount claimed in respect of zero-rated supplies, subject to the prescribed conditions. With the amendment, eligible registered persons claiming refunds on account of IDS can benefit from provisional sanction of 90 per cent of the claimed refund amount, subject to applicable conditions, limitations, safeguards and risk-based verification, followed by final settlement of the claim after due scrutiny.