Charging and accounting for GST when you provide discounts and rebates such as prompt payment discounts and volume rebates.
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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.
Example 1: Sales discount
GST to be charged = 9% x $1,800 = $162
Prompt payment discount
Prior to 1 Apr 2020, 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 and fulfils the payment terms under the prompt payment discount. The treatment does not apply to payments by instalments.
Example 2 (GST treatment prior to 1 Apr 2020)
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.
With effect from 1 Apr 2020, GST will be chargeable and accountable on the discounted price only if your customer takes up and fulfils the payment terms under the prompt payment discount. If your customer does not take up and fulfil the payment terms under the prompt payment discount, you are required to charge and account for GST based on the gross undiscounted amount. The GST treatment of prompt payment discounts is amended to align with the GST principle of value of supply, where GST is charged based on the consideration received.
If your customer satisfies the payment terms under the prompt payment discounts, you are required to issue a credit note to reduce the taxable supplies and GST values charged in your initial tax invoice. Accordingly, you can reduce the output tax previously accounted for in your GST returns. If your customer is GST-registered and has claimed the GST (i.e. based on the gross invoice value) stated in your tax invoice, he is required to reduce his input tax claim accordingly based on the credit note received.
If you have difficulty issuing credit notes, you may write in to the Comptroller for approval to use an alternative method to inform your customer of the reduction in GST charged.
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 9/109 of the cash rebate received and issue a tax invoice to you.