Chandrasekhar Kutty, Founding Partner, Sashthi Taxlegal Advisory Services LLP | GST Litigation • Advisory • Appellate Representation | Hosur • Bengaluru
27 October 2026
From 1 November 2026, three amendments to the CGST Act made by the Finance Act, 2026 come into force: post-sale discounts can be deducted from taxable value through a credit note without a pre-supply agreement, section 34 expressly permits credit notes for such discounts, and 90% provisional refund extends to inverted duty structure claims. The appointed date is fixed by Notification No. 03/2026-Central Tax dated 26.10.2026, issued under section 1(2)(b) of the Finance Act, 2026, which had left sections 153 to 155 to come into force on a date to be notified.
What the notification does
The notification is a commencement notification only. It appoints 1 November 2026 as the date on which sections 153, 154 and 155 of the Finance Act, 2026 take effect. It does not itself prescribe any procedure, and it does not give the amendments retrospective effect. Supplies, credit notes and refund applications before that date continue to be governed by the pre-amendment provisions.
The three amendments
| Finance Act, 2026 | CGST Act provision | Change from 1 November 2026 |
|---|---|---|
| Section 153 | Section 15(3)(b) – post-supply discount | The old conditions that the discount be established under an agreement entered into at or before the supply and be specifically linked to the relevant invoices are replaced. A discount given after the supply is now excluded from value where the supplier has issued a credit note for it and the recipient has reversed the input tax credit attributable to it, in accordance with section 34. |
| Section 154 | Section 34(1) – credit notes | A new limb is added: a credit note may be issued where a discount referred to in section 15(3)(b) is given after the supply. This gives post-sale discounts an express statutory footing for a GST credit note, instead of forcing them into the “deficiency in supply” or “excess value charged” limbs. |
| Section 155(a) | Section 54(6) – provisional refund | The 90% provisional refund, hitherto available only for zero-rated supplies, is extended to refund of unutilised input tax credit on account of inverted duty structure under clause (ii) of the first proviso to section 54(3). CBIC had been granting this administratively since Instruction No. 06/2025-GST dated 03.10.2025; it is now in the statute. |
| Section 155(b) | Section 54(14) – Rs 1,000 threshold | The bar on refunds below Rs 1,000 no longer applies where the refund is claimed on account of goods exported out of India with payment of tax. Low-value courier and e-commerce exporters are the intended beneficiaries. The threshold continues for every other category of refund. |
Why the discount amendment matters
Post-sale discounts have been one of the most litigated issues in GST. Year-end volume discounts, target incentives and scheme discounts were routinely disallowed as deductions from value because no agreement existed at the time of supply, or because the discount could not be linked invoice by invoice. Suppliers were pushed into commercial credit notes without GST adjustment, while the department demanded tax on the full invoice value. The earlier mechanism of collecting certificates from recipients to evidence ITC reversal added cost without resolving the legal question.
From 1 November 2026, the test is simpler and verifiable from returns: a GST credit note by the supplier, and reversal of the attributable credit by the recipient. The pre-supply agreement condition is gone. What the amendment does not do is make the credit note optional: a discount recorded only in the books, with no credit note and no reversal by the recipient, still does not reduce taxable value.
Points to watch
- Time limit for credit notes. Section 34(2) still requires the credit note to be declared by 30 November following the end of the financial year of the supply, or the annual return date, whichever is earlier. Discounts settled late in the following year will miss this window.
- Recipient reversal is the supplier’s risk. The deduction from value depends on an act of the recipient. Suppliers should build the reversal obligation into scheme terms and track it through IMS, where the recipient’s action on the credit note is visible.
- No retrospectivity. Pending demands for periods before 1 November 2026 will continue to be tested against the old section 15(3)(b). The amendment can still be cited as evidence that Parliament regarded the old conditions as unworkable, but that is an argument, not a defence.
- Inverted duty refunds. With provisional refund in the statute, delay beyond the seven days contemplated by rule 91 becomes a stronger ground for a writ and for interest under section 56.
What businesses should do now
- Review existing discount and incentive schemes and reword them so that settlement is by GST credit note with recipient reversal, for supplies on or after 1 November 2026.
- Set up a tracker of credit notes issued and recipient reversals, reconciled through IMS, so that the section 15(3)(b) condition can be evidenced in an audit.
- Exporters paying IGST on low-value consignments should file refund claims for amounts below Rs 1,000 for exports on or after 1 November 2026.
- Manufacturers with inverted duty structure should expect the 90% provisional refund as a matter of right and follow up where it is not sanctioned within rule 91 timelines.
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Source: Notification No. 03/2026-Central Tax dated 26.10.2026 [S.O. 5791(E), F. No. CBIC-20001/1/2026-GST]; sections 1(2)(b) and 153 to 155 of the Finance Act, 2026 (4 of 2026). This article is for general information and does not constitute professional advice. Readers should obtain specific advice before acting on any matter discussed here.