Post-Sale Discount Under GST From 1 November 2026: New Section 15(3)(b) Drops the Prior-Agreement Condition, Credit Note and ITC Reversal Now Decide It

Quick Summary

From 1 November 2026, a post-sale discount under GST is excluded from the value of supply if the supplier issues a credit note and the recipient reverses the attributable input tax credit, in accordance with section 34 of the CGST Act.
The substituted section 15(3)(b) no longer contains the condition that the discount be established by an agreement entered into at or before the supply and specifically linked to the relevant invoices.
Section 34(1) now expressly allows a credit note “where a discount referred to in clause (b) of sub-section (3) of section 15 is given”.
The changes are made by sections 153 and 154 of the Finance Act 2026, brought into force from 1 November 2026 by CBIC Notification No. 03/2026-Central Tax dated 26 October 2026.
The proviso to section 34(2), in force from 1 October 2025, still blocks the supplier’s reduction in output tax where a registered recipient has not reversed the ITC on the credit note.

The treatment of a post-sale discount under GST with a credit note changes on 1 November 2026. Section 153 of the Finance Act 2026 substitutes clause (b) of section 15(3) of the Central Goods and Services Tax Act, 2017, and section 154 amends section 34(1). The Finance Act left the date of these two sections to be appointed by the Central Government (section 1(2)(b)). CBIC Notification No. 03/2026-Central Tax, dated 26 October 2026, appoints “the 1st day of November, 2026 as the date on which the provisions of sections 153 to 155 of the said Act shall come into force”. For businesses that give volume rebates, year-end incentives or other discounts after the invoice is raised, the test for keeping the discount out of the taxable value is now different.

What did section 15(3)(b) say before 1 November 2026?

Section 15(3) of the CGST Act says the value of supply shall not include a discount given in two situations. Clause (a), which is unchanged, covers a discount given before or at the time of supply and duly recorded in the invoice. Clause (b), until 31 October 2026, covered a discount given after the supply had been effected, if:

“(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.”

Both conditions had to be met. A discount agreed only after the supply, or one that could not be linked to specific invoices, failed condition (i) even if the recipient reversed the credit.

What does the new section 15(3)(b) say from 1 November 2026?

The substituted clause reads:

“(b) after the supply has been effected, if for such discount, a credit note has been issued by the supplier and input tax credit as is attributable to such discount has been reversed by the recipient of the supply, in accordance with the provisions of section 34.”

Condition for excluding a post-supply discount	Until 31 October 2026	From 1 November 2026
Agreement entered into at or before the time of supply	Required	Not in the clause
Discount specifically linked to relevant invoices	Required	Not in the clause
Document from the supplier	“document issued by the supplier”	A credit note issued by the supplier
ITC reversal by the recipient	Required	Required
Link to section 34	None in the clause	“in accordance with the provisions of section 34”

How does section 34 now deal with credit notes for discounts?

Section 34(1) lists the situations in which a supplier may issue credit notes: where the taxable value or tax charged in the invoice exceeds what is payable, where goods are returned, or where goods or services are found to be deficient. Section 154 of the Finance Act 2026 adds a fourth: “or where a discount referred to in clause (b) of sub-section (3) of section 15 is given”. The supplier may issue “one or more credit notes for supplies made in a financial year”, containing the particulars prescribed.

The rest of section 34 is unchanged and now governs the discount credit note directly:

Time limit (section 34(2)). The credit note must be declared in the return for the month in which it is issued, but not later than 30 November following the end of the financial year in which the supply was made, or the date of furnishing the relevant annual return, whichever is earlier.
Recipient reversal (proviso to section 34(2), in force from 1 October 2025). No reduction in the supplier’s output tax liability is permitted if the ITC attributable to the credit note, if availed, has not been reversed by the recipient, where the recipient is a registered person; or, in other cases, if the incidence of tax on the supply has been passed on to any other person.

Who is affected by the post-sale discount change?

Suppliers who give discounts after invoicing, including target-based or year-end discounts that were not fixed in an agreement at the time of supply. From 1 November 2026, the clause asks for a credit note and the recipient’s ITC reversal under section 34, not a prior agreement linked to invoices.
Registered recipients, because the discount stays outside the supplier’s taxable value only when they reverse the attributable ITC, and the supplier’s output tax reduction depends on that reversal under the proviso to section 34(2).
CAs and finance teams who review discount schemes, credit note registers and the 30 November cut-off in section 34(2).

Does the change apply to discounts on supplies made before 1 November 2026?

Neither section 153 of the Finance Act 2026 nor Notification No. 03/2026-Central Tax contains a transition provision for discounts relating to supplies made before 1 November 2026. The notification only appoints the date on which sections 153 to 155 come into force. Where a discount spans that date, the position should be examined on the facts with the statutory text in hand.

What should businesses do before and after 1 November 2026?

Route post-supply discounts through GST credit notes under section 34(1) for supplies covered by the new clause, since section 15(3)(b) now requires “a credit note”.
Confirm the recipient’s ITC reversal. Both the new section 15(3)(b) and the proviso to section 34(2) depend on it for registered recipients.
Diarise the section 34(2) cut-off: 30 November following the end of the financial year of supply, or the annual return date if earlier.
Review discount schemes and customer contracts that were drafted around the old “agreement at or before supply” condition, so that internal approvals and documentation match the clause in force on the date the discount is given.

Sources

Source: Central Board of Indirect Taxes and Customs, Notification No. 03/2026-Central Tax, 26 October 2026 (sections 153 to 155 of the Finance Act 2026 in force from 1 November 2026), taxinformation.cbic.gov.in.
Source: The Finance Act, 2026 (4 of 2026), sections 1(2)(b), 153 and 154, Gazette of India Extraordinary, Part II, Section 1, 30 March 2026, egazette.gov.in.
Source: Central Goods and Services Tax Act, 2017, sections 15 and 34 with amendment notes, CBIC tax information repository, taxinformation.cbic.gov.in.

Related reading on Tax Update India: GST refund rules from 1 November 2026 and the 57th GST Council recommendations of 8 October 2026.

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Reworking your discount schemes or credit note process for the new section 15(3)(b)? Tax Update India can help you work through it. Book a quick call.

Disclaimer: This article is for general information only and reflects the law as on the date of publication. It is not legal or tax advice. Please consult a qualified professional before acting on it.

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CA Adityavikram Banka

Founder at A S Banka Advisors Private Limited

The author is Founder of A. S. Banka Advisors Private Limited & Partner at Dhiraj & Dheeraj.

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