NEW DELHI: The Central Board of Indirect Taxes and Customs issued much-awaited clarifications to address problems faced by businesses when companies offer discounts to sellers. The move follows a discussion in this regard at the last all-important meeting of the GST Council, where GST rates were reduced.Very often dealers are offered discounts to push products lying in their inventory. For instance, a new model of a mobile phone may impact the sale of an earlier version lying in the dealer’s inventory. In such cases, companies can offer a 10% discount for a device which costs, say, Rs 20,000. As a result, the retailer would sell the device for Rs 18,000, but the tax authorities often claimed that GST should be paid on Rs 20,000. Now, the department has clarified that tax has to be paid on the discounted price.However, at times the company asks the retailer to sell at the discounted price and the discount is routed through a distributor. In such cases, the department is of the view that tax should be paid on Rs 20,000 as there was no contract with the retailer.“This is a welcome circular as it provides much-needed clarity on the GST treatment of various types of discount transactions between manufacturers and distributors and dealers. The clarification will help industry and trade execute such transactions with greater certainty and reduce disputes around what has long been a contentious issue. For scenarios involving agreements with end customers for passing on specific benefits to end-consumers through dealers in the supply chain, businesses may need to evaluate their positions,” said Abhishek Jain, partner and national head for indirect tax at KPMG, India.