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Certificate Requirement Under Circular No. 212/6/2024-GST for ITC Reversal on Post-Supply Discounts

  • Writer: tax comply
    tax comply
  • Jun 1
  • 3 min read


The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 212/6/2024-GST dated 26th June 2024, providing much-needed clarity on the documentation required for claiming post-supply discounts without including them in the value of taxable supply. This circular addresses the compliance mechanism for Input Tax Credit (ITC) reversal, as mandated under Section 15(3)(b)(ii) of the CGST Act, 2017.


Legal Provision: Section 15(3)(b) of the CGST Act

Section 15(3)(b) of the CGST Act allows post-supply discounts to be excluded from the value of taxable supply, but only if the following conditions are met:

  1. The discount must be pre-agreed in a contract executed at or before the time of supply.

  2. It must be specifically linked to relevant invoices.

  3. The recipient must have reversed the ITC attributable to the discount based on a document issued by the supplier.

These provisions ensure that the benefits of ITC are proportionally reversed when there is a reduction in taxable value due to post-supply discounts.

Practical Challenge: No Verification Mechanism on GST Portal

A key issue faced by taxpayers has been the lack of functionality on the GST common portal to verify whether the recipient has reversed the proportionate ITC related to such post-supply discounts. Without a digital mechanism, tax officers and suppliers found it difficult to demonstrate compliance with Section 15(3)(b)(ii).

To overcome this challenge, the CBIC has now provided an alternative documentary mechanism through the latest circular.

Requirement of CA/CMA Certificate for Post-Supply Discount Credit Notes

As per Circular No. 212/6/2024-GST, until a system-based solution is implemented, suppliers are required to obtain a certificate from the recipient, issued by a Chartered Accountant (CA) or a Cost Accountant (CMA), confirming the following:

  • The recipient has made a proportionate reversal of ITC attributable to the discount.

  • The reversal relates to credit notes issued by the supplier under Section 34 of the CGST Act.

Details to Be Included in the CA/CMA Certificate

The certificate issued by the CA or CMA must include:

  • Credit note numbers and corresponding invoice references.

  • The amount of ITC reversal for each credit note.

  • Documentary evidence of reversal (e.g., GST DRC-03, returns, or other documents).

  • A valid UDIN (Unique Document Identification Number).

CAs’ UDINs can be verified at: https://udin.icai.org/search-udin
🔹 CMAs’ UDINs can be verified at: https://eicmai.in/udin/VerifyUDIN.aspx

Relaxation for Discounts Up to ₹5 Lakhs Per Financial Year

For discounts involving a total tax impact of ₹5,00,000 or less per financial year, a CA/CMA certificate is not mandatory. In such cases, the supplier may instead obtain a self-certified undertaking from the recipient, containing:

  • Reference to the credit notes and invoices.

  • Amount of ITC reversed.

  • Documentary evidence of such reversal (e.g., DRC-03 or return filing).

This provision significantly eases compliance for smaller transactions while maintaining evidence integrity.

Admissibility and Use of Certificates

Whether it is a CA/CMA certificate or a recipient's self-declaration, these documents are considered suitable and admissible evidence for:

  • Verifying compliance under Section 15(3)(b)(ii),

  • Presenting during scrutiny, audit, investigation, or any other proceeding,

  • Supporting past transactions, where such evidence was not previously maintained.

Suppliers are advised to retain these certificates carefully and furnish them to tax authorities if called upon.

Conclusion

The introduction of this certificate-based mechanism provides a much-needed solution for ensuring compliance with ITC reversal obligations on post-supply discounts. In the absence of portal-based verification, the reliance on CA/CMA certification or recipient undertakings offers a practical and legally valid alternative.





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