Question ID : 40687

GST Implication of Sale Price less than Purchase Cost

A trader sells goods at a price which is less than the purchase cost of the same and thereby accumulates the ITC. He does this for achieving volume discount on purchases made by him. 1. Can the trader carry forward such accumulated ITC and utilise the same for future GST liability? I guess there can not be a situation of refund since it does not fall under inverted duty structure. 2. Would the discounts so received amount to subsidies directly linked to price as stated in Sec 15(2)(e).

Answer ID : 80564

in my opinion, answer to your question would be as under:- 1. Yes, he can accumulate the ITC and utilize the same for future liabilities. selling at a price less than its cost is not questionable until the buyer and suppliers are related parties. 2. No, discount received from suppliers would not be treated as subsidies as it is not received from Govt.

Answer ID : 80571

There does not arise a question of reduction of ITC if goods are sold at loss. However, Value for a supply is a transaction value, which will be reduced by any discount provided subsequent to the supply of goods. Hence, any reduction in value through discount would result in reduction of transaction value and reduction of corresponding ITC. In such an event the trader must be provided a credit note along with GST within the prescribed time. Correspondingly, there will be a reduction of ITC by the trader and similarly the reduction of output tax liability of the supplier of trader (within 1.5 year - as prescribed)

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