India
GST Rules on Post‑Sale Discounts and Export Refunds Take Effect on 1 November
On 1 November, new provisions of India’s goods and services tax (GST) will come into force, easing documentation for businesses and clarifying eligibility for certain exporter refunds. The finance ministry announced the implementation date on 26 October, bringing Sections 153 to 155 of the Finance Act, 2026, into effect. The changes amend Sections 15, 34 and 54 of the Central Goods and Services Tax (CGST) Act, 2017, allowing businesses to exclude eligible post‑supply discounts from taxable value through GST credit notes, provided recipients reverse the corresponding input tax credit (ITC). The amendment removes the earlier requirement that discounts be established through an agreement entered at or before the time of supply and linked to the relevant invoices. The move is expected to benefit sectors such as fast‑moving consumer goods, pharmaceuticals, retail and consumer durables, where dealer incentives and volume‑based discounts are common.
Rahul Shekhar, partner, indirect tax, Nangia Global, said: "Businesses can now issue GST credit notes for eligible post‑sale discounts, subject to the recipient reversing the corresponding ITC. This will help industries such as FMCG, pharmaceuticals, retail and consumer durables, where dealer incentives and volume‑based discounts are common. Previously, the absence of a clearly documented agreement could make such credit notes an additional cost to businesses."
The notification follows the 57th meeting of the GST Council on 8 October, which recommended procedural reforms covering registration, returns, refunds and adjudication. On 26 October, the Central Board of Indirect Taxes and Customs (CBIC) issued six circulars clarifying provisions related to export proceeds, registration, adjudication and ITC. One key clarification states that the omission of Rule 96(10) of the CGST Rules will apply retrospectively from 23 October 2017, following the Supreme Court’s 6 August 2026 judgment in Goodluck India Ltd vs. Union of India. The rule, introduced in 2017, sought to prevent exporters from claiming integrated GST (IGST) refunds while also availing specified input exemptions or concessions. The government omitted it prospectively from 8 October 2024, and the court held that, in the absence of a saving or sunset clause, the omission applied to proceedings pending on that date. The CBIC has directed officers to follow the judgment and extended the same treatment to Rules 89(4A) and 89(4B). The clarification could provide relief in pending cases but does not automatically make every past refund claim admissible.
The board also clarified that payments received by Indian service exporters through repatriable rupee accounts, including Special Non‑Resident Rupee (SNRR) and INR Nostro accounts, can satisfy the export‑of‑services condition, subject to applicable requirements. Export receivables set off against import payables will also qualify when the settlement follows Reserve Bank of India (RBI) directions. Further clarifications cover reinsurance brokers’ net‑retention commissions and the prescribed period for realizing export proceeds. Refund recovery under Rule 96B should not be undertaken where an authorized dealer bank has wholly or partly written off the realization requirement.
Manoj Mishra, partner and tax controversy management leader at Grant Thornton Bharat, said the circular aligned GST treatment more closely with foreign‑exchange regulations. "The recognition of receipts through repatriable INR accounts, RBI‑permitted set‑offs of export receivables against import payables, and specified net‑retention arrangements reflects the changing realities of cross‑border payments," Mishra said.
The CBIC has also set processing timelines for GST registration applications to address delays, repeated queries and inconsistent documentation requirements. Applications involving successful Aadhaar authentication must be processed within seven working days, while cases requiring physical verification must be processed within 30 days after verification. Bank details are not mandatory at the application stage but may be furnished where available. Applicants can raise grievances over undue delays or unwarranted queries with designated tax authorities.
In a separate circular, the board directed officers to issue reasoned show‑cause notices specifying allegations, supporting evidence, applicable legal provisions and the basis of proposed demands, with year‑wise calculations where possible. Allegations of fraud, wilful misstatement or suppression must be supported by facts rather than boilerplate language. Authorities must consider taxpayers’ submissions and record clear findings to help reduce avoidable litigation.
The CBIC also clarified that eligible banks and financial institutions opting for the Section 17(4) mechanism must follow the 50% ITC route across their qualifying registrations, while registrations not engaged in accepting deposits or extending loans and advances are outside this requirement. The board further withdrew its earlier restriction on ITC for demonstration vehicles under the dealer‑agency model, saying such vehicles serve the same purpose as those used by traditional dealerships.
Saurabh Agarwal, tax partner at EY India, said the clarifications would improve consistency in tax administration. "Clearer guidance on registration, including documentation for co‑working spaces and consent‑based premises, should reduce differing interpretations and make compliance more predictable for genuine taxpayers," Agarwal said.