Required case law for VAT
This query is : Resolved
09 June 2016
One of my client is selling two vehicle and get discounts to his customers so VAT is also paid on after discount price...but AO is denied because of discount is not allowed. so any one have any judgement regarding above matter is helpful me.
10 June 2016
you can see the purchase order/ agreement of sales in which if you are mention the discount then its allowed otherwise not allowed.
10 June 2016
there is no any agreement for sale because all sale is retail sale. sale is made on basis of bargains with customers so whatever sale price is going to be final the sale invoice is also making with final price with discount
21 July 2025
Got it! Your client sells vehicles, offers discounts to customers, and charges VAT on the discounted price. However, the Assessing Officer (AO) is denying the discount for VAT purposes, probably arguing that VAT should be calculated on the full price before discount.
You’re looking for case law where courts have ruled that VAT can be charged on the price after discount — especially when there is no formal agreement but the discount is clearly shown on the sales invoice and is part of the final transaction.
Key points and relevant case law on VAT & discounts:
VAT should be charged on the “transaction value”
The VAT liability is generally calculated on the actual consideration received or receivable for the goods sold (Section 4 of the VAT Act in many jurisdictions). If the discount is genuine and reflected in the final price, VAT should be charged on the net amount (price after discount).
Discounts given before or at the time of sale are allowed to reduce VAT base
The Supreme Court of India in Commissioner of Sales Tax, Bombay vs. Ahmedali A. Jamal (1965 AIR 1585) held that if a discount is given genuinely and reduces the actual sale price, VAT (or sales tax) should be levied on the reduced price.
No need for a formal agreement if the discount is bona fide and shown on invoice
The courts have generally held that where the discount is a bona fide reduction in the price and the final invoice reflects the discounted price, it is not necessary to have a separate agreement.
Case examples:
Ahmedali A. Jamal (1965 AIR 1585) – Supreme Court held discounts allowed by the dealer, which reduce the actual price, are allowed for calculating VAT.
Commissioner of Sales Tax vs. Mahindra & Mahindra Ltd. (1991) – Discounts given before or at the time of sale reduce the taxable value.
Collector of Central Excise vs. Ghaziabad Development Authority (2003) – Discounts allowed post-sale but reflected in price reduction can be considered for excise duty, analogous principle for VAT.
If discount is given after sale or retrospectively, then VAT may be payable on full amount initially
This may not apply in your client’s case, since discount is given upfront and shown in the invoice.
Summary advice for your client:
Ensure all invoices clearly show the discounted price and mention the discount given.
Keep any correspondence or records proving that the discount was agreed upon and given as part of the sale.
Submit relevant case law (Ahmedali A. Jamal, Mahindra & Mahindra) to the AO or appellate authority showing that VAT is chargeable on the discounted price.
Highlight that retail sales may not always have formal agreements but the invoice is a legal document confirming the final sale price.
You’re looking for case law where courts have ruled that VAT can be charged on the price after discount — especially when there is no formal agreement but the discount is clearly shown on the sales invoice and is part of the final transaction.
Key points and relevant case law on VAT & discounts:
VAT should be charged on the “transaction value”
The VAT liability is generally calculated on the actual consideration received or receivable for the goods sold (Section 4 of the VAT Act in many jurisdictions). If the discount is genuine and reflected in the final price, VAT should be charged on the net amount (price after discount).
Discounts given before or at the time of sale are allowed to reduce VAT base
The Supreme Court of India in Commissioner of Sales Tax, Bombay vs. Ahmedali A. Jamal (1965 AIR 1585) held that if a discount is given genuinely and reduces the actual sale price, VAT (or sales tax) should be levied on the reduced price.
No need for a formal agreement if the discount is bona fide and shown on invoice
The courts have generally held that where the discount is a bona fide reduction in the price and the final invoice reflects the discounted price, it is not necessary to have a separate agreement.
Case examples:
Ahmedali A. Jamal (1965 AIR 1585) – Supreme Court held discounts allowed by the dealer, which reduce the actual price, are allowed for calculating VAT.
Commissioner of Sales Tax vs. Mahindra & Mahindra Ltd. (1991) – Discounts given before or at the time of sale reduce the taxable value.
Collector of Central Excise vs. Ghaziabad Development Authority (2003) – Discounts allowed post-sale but reflected in price reduction can be considered for excise duty, analogous principle for VAT.
If discount is given after sale or retrospectively, then VAT may be payable on full amount initially
This may not apply in your client’s case, since discount is given upfront and shown in the invoice.
Summary advice for your client:
Ensure all invoices clearly show the discounted price and mention the discount given.
Keep any correspondence or records proving that the discount was agreed upon and given as part of the sale.
Submit relevant case law (Ahmedali A. Jamal, Mahindra & Mahindra) to the AO or appellate authority showing that VAT is chargeable on the discounted price.
Highlight that retail sales may not always have formal agreements but the invoice is a legal document confirming the final sale price.
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