Excise duty on discount received

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 January 2014 All the Respected Experts,

I have a doubt that whether Excise Duty is payable on the Discount received or not. Because, for one of our client when a purchase transaction is happened then they will pay Excise Duty and take the Excise Credit but as and when they receive credit note from the customer(from whom we purchse), no particular Excise Duty is paid,

Please reply about the above query as earlier as possible, because the above Discount Received is in lumpsum and the non-payment of Excise Duty will lead to further problems.

ACA Ketan Lohia

ACA Ketan Lohia (Expert)
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14 January 2014 Discounts - Any type of discount should not be included in the transaction value for calculating the Excise duty, be it Trade discount, or cash discount for prompt payment.

Where the assessee claims that discount is not readily known, but would be known subsequently - for ex. year end discounts, then the assessee has to make a request to the department for making a provisional assessment.

In the given case -
No excise duty is at all to be paid on the Discount Received through Credit Notes.

There is NO non-compliance in the given case.

However, if the discount amount is huge and is not known at the time of invoicing then the clients buyer should apply to the department for provisional assessment where in the duty will be paid today provisionally and later on when the discount amount is determined (within the time limit allowed by the department)then final assessment shall be done and deficit duty is to be paid with interest @ 18% p.a. and excess shall be refunded with interest @ 6% p.a.

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Querist : Anonymous

Querist : Anonymous (Querist)

18 January 2014 Thank you very much sir for your understandable explanation, Here we know how much will be the discount and that is constant(for example Rs.7/kg), but it is not mentioned in the first purchase invoice, but the credit note is raised by the seller quarterly, so that the total discount received by the purchaser is total quantity purchased*Rs.7, then what will be the treatment of excise duty and its provisional payment,

Awaiting for your reply,

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ACA Ketan Lohia

ACA Ketan Lohia (Expert)
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18 January 2014 First of all I would like to correct in the previous reply that in the second line of the last paragraph of my explanation it will be "client's seller" and not "clients buyer".

Answer to your query -
Provisional amount of excise duty can be paid -
1.either on higher side i.e. without excluding the discount of Rs. 7 per unit.
In this case when at the end of the quarter the credit note is received then assessment will be finalised and duty amount corresponding to the discount amount will be refunded @ 6% p.a.

2.or on lower side i.e. after excluding the discount of Rs. 7 per unit. In this case, when the credit note is received at the end of quarter then the assessment will be finalised and no more duty will be payable.

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Querist : Anonymous

Querist : Anonymous (Querist)

21 January 2014 Thank you very much sir,