Auralink Electronics Ltd. (hereinafter referred to as AEL) is engaged in manufacturing air purifiers. It is registered in the State of Haryana. It…

(a) Section 15(3)(a) of the CGST Act, 2017 allows discounts to be deducted from the value of taxable supply if the same is given before or at the time of the supply and if such discount has been duly recorded in the invoice issued in respect of such supply. In other words, pre-supply discounts recorded in invoices are allowed as deduction. Further, post supply discounts are also allowed as deduction from the value of supply under section 15(3) (b) of the CGST Act, 2017 if- (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. In the given case, Cygnatek Electronics is entitled for 10% discount on air purifiers supplied by AEL for the quarters April-June as well as July-September as it has sold more than 500 air purifiers in each of these quarters. However, since the sales targets are achieved after the entire stock for the respective quarters of April-June and July-September has been dispatched, the discounts on the air purifiers supplied to Cygnatek Electronics for the quarters of April-June and July-September is a post-supply discount. Such post-supply discount will be allowed as a deduction from the value of supply since the discount policy was known before the time of such supply and the discount can be specifically linked to relevant invoices (invoices pertaining to air purifiers supplied to Cygnatek Electronics for the quarters of April-June and July-September) provided Cygnatek Electronics reverses the input tax credit attributable to the discount on the basis of document issued by AEL. The value of supply for the quarters of April-June and July-September will thus, be computed as under: Computation of value of supply for the quarter - April-June Particulars Amount (₹) Price at which the air purifiers are supplied to Cygnatek Electronics [Note 1] 8,400 Add: Packing expenses [Note 2] 1,200 Less: Discount [Note 3] Nil Value of taxable supply of one unit of television 9,600 Value of taxable supply of air purifiers for the quarter April-June [9,600 × 750] 72,00,000 Notes: (1) The value of a supply is the transaction value, which is the price actually paid or payable for the said supply, in terms of section 15(1) of the CGST Act, 2017 presuming that the supplier and the recipient of supply are not related and price is the sole consideration for the supply as the supplier and recipient are not related parties. (2) The value of supply includes incidental expenses like packing charges in terms of section 15(2) (c) of the CGST Act, 2017. (3) Since Cygnatek Electronics has not reversed the input tax credit attributable to such discount on the basis of document issued by AEL, the conditions specified in section 15(3) (b) of the CGST Act, 2017 have not been fulfilled. Thus, the post-supply discount will not be allowed as deduction from the value of supply. Computation of value of supply for quarter - July-September Particulars Amount (₹) Price at which the air purifiers are supplied to Cygnatek Electronics [Note 1] 8,400 Add: Packing expenses [Note 2] 1,200 Less: Discount [Note 3] (840) Value of taxable supply of one unit of television 8,760 Value of taxable supply of air purifiers for the quarter July-September [₹ 8,760 x 1,000] 87,60,000 Notes: (1) The value of a supply is the transaction value, which is the price actually paid or payable for the said supply, in terms of section 15(1) of the CGST Act, 2017 presuming that the supplier and the recipient of supply are not related and price is the sole consideration for the supply as the supplier and recipient are not related parties. (2) The value of supply includes incidental expenses like packing charges in terms of section 15(2) (c) of the CGST Act, 2017. (3) Since all the conditions specified in section 15(3) (b) of the CGST Act, 2017 have been fulfilled, the post-supply discount will be allowed as deduction from the value of supply. The input tax credit to be reversed will work out to be - 1,51,200 [1,000 x (8,400 x 10%) x 18%].