GST on Discounts and Rebates

Charging and accounting for GST when you provide discounts and rebates such as prompt payment discounts and volume rebates.

Discounts Given to Customer

Sales Discount

When you offer your customers a discount on the selling price of your goods and services, GST is chargeable on the net discounted price.

You are giving a 10% discount on the sale of a sofa set. The selling price of the sofa set (excluding GST) is $2,000. You should charge GST on the net discounted price of $1,800.

GST to be charged = 7% x $1,800 = $126

Prompt Payment Discount

When you offer a discount for prompt payment to your customers, GST is chargeable on the net price after the prompt payment discount.

This GST treatment applies to all prompt payment discounts regardless of whether your customer takes up the discount offer. The treatment does not apply to payments by instalments.

You are selling goods to your customer at $100 (excluding GST). The sale will be subjected to a discount of 10% should your customer pay within 30 days from the date of the tax invoice.

GST is chargeable on the net price after the prompt payment discount (i.e. 90% of the selling price excluding GST).

GST to be charged = 7% x $90 = $6.30

For this transaction, you should report your value of standard-rated supplies (Box 1) as $100 and your output tax (Box 6) as $6.30.

Rebates Given to Customers

The GST treatment depends on the circumstances in which the rebate is given.

1. Rebates for Certain Purchase Amounts

You may give a volume rebate to your customer for making purchases above a certain amount.

When the Rebate is Given in the Form of Cash

  • When the rebate is given to your customer in the form of cash, it is equivalent to a discount given for past purchases.
  • You are required to issue a credit note to your customer to reduce the selling price and GST amount for his past purchases. You should make the corresponding adjustments in your GST return for the period in which you issue the credit note. 
  • Your customer, if GST-registered, should reduce his input tax claim in his GST return for the period in which he receives the credit note.

When the Rebate is Used to Offset Future Sales

When the rebate is used to offset against the value of your next sale to the customer, you should charge and account for GST on the net value of that sale (i.e. after deducting the rebate).

2. Conditional Rebates Given to Customers

When your customer needs to meet certain obligations  imposed by you (e.g. undertake advertising and marketing activities) to be entitled to a rebate, your customer is providing a separate supply of services to you.

This is so even if the rebate is based on your customer's purchase volume. Your customer, if GST-registered, should account for GST at 7/107 of the cash rebate received and issue a tax invoice to you.

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