The Central Board of Indirect Taxes and Customs (CBIC) had clarified that discounts that dealers get from manufacturers and wholesalers help in boosting sales and therefore amount to a taxable consideration flowing from the supplier to the retailer.
Such discounts are to be added to the transaction value between retailer and consumer for payment of Goods and Services Tax (GST).
It suggested that wherever suppliers give discounts to retailers without any obligation by the latter to render services like advertisement campaign or special sales drive, such discounts are not to be subject to GST.
However, if discounts from the manufacturer or supplier are linked to such obligations by the retailer, it should be taxed.
The tax authority sought to distinguish discounts in such cases as a separate transaction between the manufacturer and the retailer from the sale of goods made by the retailer to the end consumer.