GST Treatment of Post-Sale Discounts – CBIC Circular 251/2025

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  • Last Updated on 16 September, 2025

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GST treatment of post-sale discounts

Circular No. 251/08/2025-GST, Dated 12-09-2025

1. Introduction

The Central Board of Indirect Taxes and Customs (CBIC) has released a circular providing much-needed clarity on the treatment of post-sale discounts under GST. The move comes in response to several representations received from businesses seeking guidance on how secondary or post-sale discounts should be treated for tax purposes.

2. Context of the Clarification

Post-sale discounts are a common practice in commercial arrangements, especially between manufacturers and dealers. However, the lack of uniform clarity in GST law often led to disputes regarding whether such discounts required reversal of Input Tax Credit (ITC) or could be classified as a separate supply. The CBIC circular aims to address these ambiguities and ensure consistent compliance across industries.

3. Input Tax Credit and Credit Notes

One of the key clarifications provided is that the recipient is not required to reverse ITC in respect of discounts extended through financial or commercial credit notes. Since these discounts do not alter the original transaction value of the supply, the corresponding tax liability of the supplier also remains unaffected. This ensures that buyers can continue to enjoy full credit without any additional compliance burden.

4. Treatment of Discounts and Promotional Activities

The circular also distinguishes between routine post-sale discounts and promotional activities. CBIC has clarified that regular discounts passed on to dealers will not be treated as consideration for a separate supply of services. However, when dealers are engaged in activities like advertising campaigns, co-branding, customization, special sales drives, exhibitions, or customer support services, GST will apply—provided such services are clearly specified in an agreement with a defined consideration.

5. Conclusion

The CBIC’s clarification strikes a balance between business flexibility and tax compliance. By confirming that routine post-sale discounts are outside the scope of GST while outlining clear rules for promotional activities, the circular reduces ambiguity for manufacturers and dealers alike. This step is expected to foster smoother trade practices, minimize litigation, and reinforce consistency in GST administration.

Click Here To Read The Full Circular

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied