Businesses get relief as Centre eases Input Tax Credit rules
What's the story
The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular, relieving businesses from reversing their input tax credit (ITC) when they receive post-sale discounts in the form of financial or commercial credit notes without tax adjustments. The move comes as part of an effort to clarify rules under the Goods and Services Tax (GST) regime and reduce uncertainty and disputes among businesses.
Tax clarification
GST applicability on promotional activities
The CBIC's circular states that discounts given by a manufacturer to a dealer, solely for competitive pricing and sales promotion, are not considered as payment for any independent service. This clarification is expected to ease the burden on many businesses. However, it also notes that GST will apply only on promotional activities such as co-branding, advertising campaigns, or sales drives when there is a separate agreement with clearly defined consideration.
Council influence
Circular issued after GST Council's recommendation
The CBIC's latest circular comes after a recommendation by the GST Council. The move is expected to provide clarity to businesses on their ITC entitlement and tax liability. This is in line with the government's continued efforts to simplify GST compliance for businesses and reduce disputes arising from ambiguous tax rules.