GST on prompt payment discounts

Businesses may give a prompt payment discount to their customers who are on credit terms. For example, you may give a 10% discount to a customer if he pays within 30 days from the date of tax invoice. In such instances, GST is chargeable on the net price after the prompt payment discount (i.e. 90% of the selling price).

This treatment is applicable for all prompt payment discounts regardless of whether the customer takes up the discount offer or not.

However, the treatment is not applicable for payments by instalments.