Businesses that give trade discounts, turnover incentives or rebates after a sale should review their GST credit note procedure. From 1 November 2026, amendments to sections 15 and 34 of the CGST Act, 2017 are in force. A discount given after supply no longer needs a prior agreement or a link to specific invoices. It still needs a proper GST credit note from the supplier and reversal of the related input tax credit (ITC) by the recipient.

1. What has changed in section 15(3)(b)?

According to the Notes on Clauses to the Finance Bill, 2026, the purpose is to do away with the requirement of linking the post-sale discount to an agreement specifically linked to relevant invoices, and to refer instead to issue of a credit note under section 34 where the recipient reverses the ITC.

Correspondingly, section 34(1) now allows a credit note where a discount referred to in section 15(3)(b) is given, in addition to the earlier grounds (excess value or tax, goods returned, and deficient supply).

Discounts shown in the invoice itself at or before the time of supply continue under section 15(3)(a) and are not affected.

2. When did it come into force?

• The Finance Act, 2026 (No. 4 of 2026) received Presidential assent on 30 March 2026.
• Its sections 153 to 155 were to come into force on a date notified by the Central Government.
• Notification No. 03/2026-Central Tax dated 26 October 2026 (S.O. 5791(E)) appointed 1 November 2026 as that date.

Section 155 deals with refunds, not discounts: it extends the provisional refund under section 54(6) to refunds of unutilised ITC on account of inverted duty structure, and removes the Rs. 1,000 minimum refund limit under section 54(14) for goods exported on payment of tax. This article covers only sections 153 and 154.

3. What has not changed

Recipient's reversal was already linked to the supplier's reduction. The Finance Act, 2025 amended section 34(2), with effect from 1 October 2025, to tie the reduction in the supplier's output tax on a credit note to reversal of the corresponding ITC by the recipient. The 2026 amendment builds on that position.

Circular No. 212/6/2024-GST, which provided for a CA/CMA certificate or recipient's undertaking as evidence of ITC reversal, was withdrawn by Circular No. 253/10/2025-GST dated 1 October 2025. Businesses should still keep reliable evidence of the recipient's reversal, but that circular's certificate format no longer applies.

4. A simple illustration

A consumer goods manufacturer supplies goods to a registered distributor during November and December 2026. After reviewing the distributor's performance for the quarter, the manufacturer decides in January 2027 to give an additional turnover discount that was not agreed before the supplies. All the supplies are made after 1 November 2026.

• Under the earlier law, the absence of a prior agreement and invoice linkage could prevent the discount from reducing the taxable value.
• Under the amended law, those two conditions no longer apply. The manufacturer can issue a GST credit note under section 34. The value is reduced if the distributor reverses the ITC attributable to the discount, and the credit note is declared within the section 34(2) time limit.
• If the distributor does not reverse the ITC, the supplier should not reduce its output tax. The discount can then be given only as a commercial (financial) credit note without GST adjustment.

This is a hypothetical illustration and not a conclusion on any particular business.

5. Earlier supplies and transitional cases

The amendment applies from 1 November 2026 and is not retrospective. Discounts already dealt with before that date remain governed by the earlier section 15(3)(b). How a credit note issued on or after 1 November 2026 for a discount on supplies made earlier is to be treated is not expressly addressed by the commencement notification. Such cases should be examined individually, with attention to the dates of supply, discount decision and credit note, and to any clarification that may be issued.

6. Action points for suppliers

1. 1Review FY 2025-26 discounts before 30 November 2026.Urgent
   List discounts relating to FY 2025-26 supplies that are yet to be adjusted. Decide which will go through a GST credit note and declare them within the time limit. Do not file the FY 2025-26 annual return before this is done, as filing it ends the window.
2. 2List your discount schemes.This month
   Identify turnover discounts, volume rebates, target incentives, year-end and price-protection discounts. Mark which are given in the invoice and which are given after supply.
3. 3Separate GST and financial credit notes.This month
   Use a GST credit note only where you intend to reduce output tax and the recipient will reverse ITC. Otherwise use a commercial credit note without GST.
4. 4Agree on ITC reversal with customers.This month
   Inform registered customers that GST credit notes require them to reverse the related ITC. Decide how you will obtain and keep evidence of that reversal.
5. 5Check the customer's registration status.Ongoing
   For unregistered customers there is no ITC to reverse. Examine the treatment for such customers separately.
6. 6Keep genuine documentation.Ongoing
   A prior agreement is no longer a condition, but keep the scheme, management approval, discount working and customer communication.
7. 7Reconcile monthly.Ongoing
   Match approved discounts, credit notes issued, GSTR-1 reporting and the tax adjustment in GSTR-3B.

7. Action points for recipients (distributors and dealers)

1. 1Reverse ITC on GST credit notes received.Monthly
   Where a supplier issues a GST credit note for a discount, reverse the ITC attributable to it in your return.
2. 2Check your portal records.Monthly
   Compare credit notes appearing on the portal with your books, and raise differences with the supplier.
3. 3Insist on the right document.Ongoing
   Confirm with the supplier whether a credit note is a GST credit note or a commercial one, as the ITC treatment differs.

8. Action points for GST professionals

1. 1Prioritise the 30 November 2026 time limit.
   Review FY 2025-26 discounts for clients and check the planned date of filing the FY 2025-26 annual return.
2. 2Update client procedures.
   Revise credit note SOPs and ERP settings to the amended sections 15(3)(b) and 34(1), with a step to capture the recipient's ITC reversal.
3. 3Apply old law to old periods.
   In notices or audits on discounts for periods before 1 November 2026, analyse the case under the earlier section 15(3)(b). Do not present the amendment as retrospective.
4. 4Handle transitional credit notes case by case.
   Record the dates of supply, discount decision and credit note, and watch for any clarification on credit notes issued after 1 November 2026 for earlier supplies.
5. 5Note the change in evidence requirements.
   Circular 212/6/2024-GST stands withdrawn. Advise clients on practical evidence of recipient reversal, such as customer confirmations and reconciliations.
6. 6Advise recipient clients too.
   Remind distributors that ITC reversal on GST credit notes is required, and that non-reversal will affect the supplier's ability to reduce output tax.

9. Five-minute self-check

Ask your finance or sales accounts manager to answer YES, NO or NOT SURE:

A NO or NOT SURE does not by itself mean an incorrect GST adjustment has been made. It marks an item for verification.

10. Documents to keep ready

• Original tax invoices for the supplies on which the discount is given.
• Discount scheme or approval: scheme circular, management approval, customer communication and discount working.
• GST credit notes issued under section 34, and any commercial credit notes, kept separately.
• Evidence of the recipient's ITC reversal: confirmations, reconciliations or other reliable records.
• Return records: GSTR-1 reporting of credit notes and the GSTR-3B adjustment.
• Discount reconciliation: approved discounts against credit notes, customer accounts and GST reporting.

11. What if you find a problem?

12. Official sources

1. Finance Act, 2026 (No. 4 of 2026), assented on 30 March 2026: section 153 (substitution of section 15(3)(b), CGST Act), section 154 (amendment of section 34(1)) and section 155 (amendment of section 54).
2. Notification No. 03/2026-Central Tax dated 26 October 2026 (S.O. 5791(E)): appoints 1 November 2026 for sections 153 to 155.
3. CGST Act, 2017: sections 15(3) and 34, including section 34(2) as amended by the Finance Act, 2025 with effect from 1 October 2025.
4. Circular No. 253/10/2025-GST dated 1 October 2025: withdrawal of Circular No. 212/6/2024-GST.

The Act, notification and circulars are available on taxinformation.cbic.gov.in and cbic-gst.gov.in.

Scope of this article: the article explains the amended provisions as in force from 1 November 2026. Individual discount schemes, customer arrangements and transitional cases have not been examined. Any rules or clarifications issued after the review date should be checked.

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