This circular provides clarifications on the tax implications of secondary or post-sale discounts offered by manufacturers to dealers/distributors to ensure uniformity in implementation across field formations.

It clarifies that recipients of supplies are not required to reverse Input Tax Credit (ITC) when suppliers issue financial or commercial credit notes, as such notes do not alter the original transaction value or tax liability. Post-sale discounts given by manufacturers to dealers for competitive pricing are not to be treated as consideration for any service, since these are merely reductions in sale price and not linked to independent activities.

However, where the manufacturer and dealer have an agreement for specific promotional services—such as advertising, co-branding, or exhibitions—the consideration for those defined services shall attract GST liability.