Discount or incentive given after supply :
The value of the supply shall not include any discount that is given:
(a) before or at the time of the supply provided such discount has been duly recorded in the invoice issued in respect of such supply; and
(b) after the supply has been effected, provided that (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 has been reversed by the recipient
of the supply – section 15(3) of CGST Act.
Thus, discount after supply is permissible as deduction only if it was known before or at the time of supply.
There is provision of issue of ‘credit note’ for deficiency in supply. However, such credit note cannot be issued for passing of discount which was not contemplated at the time of supply. – section 34(1) of CGST Act.
However, if incidence of GST and interest has been passed on to another person, reduction in output tax liability of the supplier shall not be permitted – proviso to section 34(2) of CGST Act.
Thus, if recipient of goods or services or both has availed input tax credit, simple credit note may be issued without claiming GST.
Giving discounts and price reductions after supply of goods and services is not uncommon in business.
However, since credit note cannot be issued after supply giving discount, the taxable person has to find some other nomenclature like deficiency in service or excess charged by clerical or other mistake etc.