GST on discounts and rebates

Key requirements

GST on a sales discount is calculated on the net price. Since 1 April 2020, a prompt-payment discount reduces GST only when the customer actually meets its terms; otherwise tax remains on the undiscounted amount. Issue a credit note when the condition is met, reducing the supplier’s output tax and the registered customer’s input claim accordingly. A cash volume rebate normally adjusts past purchases, while a rebate offset against a future sale reduces that sale’s value. A rebate requiring advertising or marketing beyond ordinary trading terms can instead be consideration for the customer’s service. A registered customer then accounts for GST and issues its own tax invoice; at the current rate, GST within an inclusive cash rebate is 9/109. Read the whole agreement rather than treating every rebate as a price reduction.