Tax Demand on Post Sale Discounts Received By Way Of Financial Credit Notes Not Tenable: Madras High Court

The Madras High Court recently quashed tax demands on post-sale discounts received via financial credit notes, ruling that such discounts do not constitute a taxable service under GST law. Justice Senthilkumar Ramamoorthy criticized the assessing officer's conclusion that these discounts boosted the supplier's sales volume through the recipient's service. The court clarified that under Section 15(3) of GST statutes, discounts can reduce supply value only if invoiced or agreed beforehand, not here. The petitioner rebutted show cause issues on input tax credit reversals for credit notes. The court voided the order on this credit note issue only.