Centre provides major relief in GST rules for post-sale discounts

The Central Government has provided significant relaxations in the GST (Goods and Services Tax) rules regarding post-sale discounts. These new changes will come into effect from 1 November, which will simplify documentation requirements for businesses and provide clarity regarding refund eligibility for exporters. According to a report by Mint, the Ministry of Finance announced this implementation date on 26 October, thereby bringing into force Sections 153 to 155 of the Finance Act, 2026.

Under these reforms, Sections 15, 34, and 54 of the Central GST (CGST) Act, 2017 have been amended. Businesses will now be able to issue GST credit notes for eligible post-sale discounts and deduct them from the taxable value, provided that the recipient reverses the Input Tax Credit (ITC) against that discount. Previously, it was mandatory for the agreement made at or before the time of supply for the discount to be linked with the relevant invoice, but this requirement has now been removed.

According to Rahul Shekhar, Indirect Tax Partner at Nangia Global, businesses can now issue GST credit notes for eligible post-sale discounts if the recipient reverses the corresponding ITC. This change will be helpful for industries such as FMCG, pharmaceuticals, retail, and consumer durables, where dealer incentives and volume-based discounts are common. Previously, due to the lack of clear documentary agreements, such credit notes became an additional cost for businesses.

This announcement has been made following the 57th meeting of the GST Council held on 8 October, in which procedural reforms including registration, returns, refunds, and adjudication were recommended. The Central Board of Indirect Taxes and Customs (CBIC) issued six circulars on 26 October to clarify provisions related to export proceeds, registration, adjudication, and ITC.

In a significant clarification, the CBIC stated that the deletion of Rule 96(10) of the CGST Rules will apply retrospectively from 23 October 2017. This decision has been taken in the wake of the Supreme Court's judgment in Gudluck India Limited vs Union of India on 6 August 2026. This rule, introduced in 2017, was designed to prevent exporters from claiming Integrated GST (IGST) refunds while availing input exemptions or reliefs. The government has removed the retrospective effect of this rule from 8 October 2024. The court ruled that in the absence of a saving or sunset clause, this deletion applies to pending proceedings as of that date. The CBIC has directed officers to comply with this judgment and has also kept Rules 89(4A) and 89(4B) under the same treatment. This clarification may provide relief in pending cases, but it does not automatically make all past refund claims acceptable.

Providing further clarity on the export process, the CBIC stated that payments received by Indian service exporters through repatriable Rupee accounts, including Special Non-Resident Rupee (SNRR) and INR Nostro accounts, may satisfy the export-services condition. Additionally, if RBI (Reserve Bank of India) guidelines are followed, export proceeds set off against import receivables will also be considered qualifying. The Board further clarified that where an authorized dealer bank has written off the recovery requirement in full or in part, refund should not be recovered under Rule 96B.

According to Manoj Mishra, Partner at Grant Thornton India, this circular makes GST transactions more consistent with foreign exchange rules. He said that income received through repatriable INR accounts, set-offs permitted by RBI, and specified net-retention arrangements reflect the changing realities of international payments.

The CBIC has also set timelines to reduce delays in the registration process. Applications that successfully complete Aadhaar authentication should be processed within seven working days, while in cases where physical verification is required, processing should occur within 30 days after verification. Providing bank details at the application stage is not mandatory, but can be provided if available. Applicants can lodge complaints with the specified tax authorities regarding undue delays or unnecessary queries.

In a separate circular regarding adjudication, the Board has directed officers to issue reasoned show-cause notices. This notice must clearly state the allegations, supporting evidence, applicable legal provisions, and the basis for the proposed demand, and where possible, should include year-wise calculations. Allegations of fraud or intentional misstatement must be supported by facts rather than mere general language. Authorities should consider the representations of taxpayers to reduce unnecessary litigation.

Clarification has also been provided for banks and financial institutions that opt for the Section 17(4) mechanism, they will have to comply with the 50% ITC route on their eligible registrations. Those registrations not associated with accepting deposits or granting loans are exempt from this requirement. Additionally, the Board has withdrawn the previous restriction on ITC for demonstration vehicles under the dealer-agency model, as these vehicles function similarly to traditional dealership vehicles.

According to Saurabh Agrawal, Tax Partner at EY India, these clarifications will bring consistency to tax administration. He stated that clear guidelines regarding registration, including documents for co-working spaces and consent-based premises, will reduce differences in interpretation and make compliance more predictable for genuine taxpayers.