Last reviewed: 10 November 2026. For years, a rebate decided after the sale was the awkward corner of GST valuation. Unless the discount was pre-agreed and tied to specific invoices, the supplier could not cut the taxable value, even when the recipient was willing to reverse credit. From 1 November 2026 that gate has been replaced. This note sets out what the notification says, what each amended section now reads, three worked examples, and the dates to watch, including 30 November 2026, which is close.
What the notification actually does
The notification is short. Using the power in section 1(2)(b) of the Finance Act, 2026, the Central Government appoints 1 November 2026 as the date on which sections 153 to 155 of that Act come into force. Those three sections had been enacted with the Finance Act but were waiting for a date. They amend sections 15, 34 and 54 of the CGST Act, 2017. The notification does not add transitional provisions, new forms or procedure; those come, if at all, from rules and circulars. Note that the notification is dated 26 October 2026, although some weekly summaries list it with other notifications of 27 October.
| CGST provision | Position before 1 November 2026 | Position from 1 November 2026 |
|---|---|---|
| Section 15(3)(b), discount after supply | Excluded from value only if (i) established under an agreement entered into at or before the time of supply and specifically linked to relevant invoices, and (ii) the recipient reversed the attributable credit | Excluded where the supplier has issued a credit note for the discount and the recipient has reversed the attributable credit, in accordance with section 34. The agreement and invoice-link conditions are no longer in the clause |
| Section 34(1), credit notes | Credit note for excess taxable value or tax, goods returned, or deficient services | Also covers a case where a discount referred to in section 15(3)(b) is given |
| Section 54(6), provisional refund | Provisional refund of up to 90% for claims on zero-rated supplies | Extended to unutilised credit allowed under clause (ii) of the first proviso to section 54(3), the inverted duty case |
| Section 54(14), minimum refund | No refund under section 54(5) or 54(6) if the amount is below ₹1,000 | The floor does not apply to refund of tax claimed on goods exported with payment of tax |
Two things have not moved. Section 15(3)(a), which covers a discount given at or before the supply and shown on the invoice, is untouched. And the recipient-side condition in section 15(3)(b) stays: if the buyer has taken credit and does not reverse the portion tied to the discount, the supplier's value does not come down. Our earlier guide on Circular 251 and ITC reversal on post-sale discounts explains the position under the old text; read it with this note for credit notes issued from 1 November 2026. As on 10 November 2026 we have not seen a CBIC circular that interprets the amended clause, so the points below rest on the statute as amended.
Worked example 1: a year-end rebate with no pre-supply agreement
A manufacturer sells goods of ₹10,00,000 plus 18% GST to a distributor in April 2026, and reports output tax of ₹1,80,000. In October the manufacturer decides, by a letter issued after the sales, to give a ₹1,00,000 volume rebate for the half-year. No agreement linked to those invoices existed at the time of supply.
| Step | Under the old text | From 1 November 2026 |
|---|---|---|
| Rebate qualifies under section 15(3)(b)? | Typically not, because the agreement and invoice-link conditions fail | Yes, if a credit note is issued and the distributor reverses credit |
| Credit note | Could be questioned as not covered by section 34(1) | ₹1,00,000 plus GST of ₹18,000, issued under section 34(1) |
| Supplier's output tax after adjustment | ₹1,80,000 stays | ₹1,62,000, once the distributor has reversed ₹18,000 of credit |
| Distributor's credit | No reversal required | Reverses ₹18,000 attributable to the rebate |
The credit note is dated November 2026 for April 2026 supplies, which belong to FY 2026-27, so the section 34(2) outer limit is 30 November 2027. The drafting point to settle is evidence: the supplier needs the credit note, proof it was communicated, and a way to see that the recipient reversed the credit.
Worked example 2: the FY 2025-26 clock
The same manufacturer also has a March 2026 sale, which belongs to FY 2025-26, and wants to give a ₹40,000 trade discount on it. Section 34(2) has not changed: the credit note cannot be issued after 30 November 2026, or the date the GSTR-9 for FY 2025-26 is furnished, whichever is earlier. If the annual return is filed on 20 November 2026, that is the last day. The amendment widens what a credit note can cover, but it does not extend the time for issuing one. For discounts on FY 2025-26 sales, the next three weeks are the practical window. The 30 November 2026 ITC deadline falls on the same date, and the two should be reviewed together.
Worked example 3: refunds that were stuck or barred
A manufacturer has accumulated credit of ₹12,00,000 because its inputs bear a higher rate than its outputs, and files a refund claim under section 54(3), first proviso, clause (ii). From 1 November 2026, section 54(6) allows provisional refund of up to 90% of the amount claimed for such claims, which would be up to ₹10,80,000 on this figure, in the manner and on the conditions the rules prescribe. The balance follows the final order. The final amount can still differ after scrutiny, and any provisional amount is subject to the safeguards in the rules.
Separately, an exporter ships a small consignment of goods with payment of IGST of ₹640. Before the amendment, section 54(14) read with the ₹1,000 floor stood in the way of a refund under section 54(5). The carve-out removes that statutory bar. The usual conditions and the departmental procedure for the refund still apply, so the claim should be built with the shipping bill and return data as before. Our guide on LUT and refunds for exporters covers the wider refund working papers for services.
Who is affected and how
| Business | What to do |
|---|---|
| Manufacturers and distributors running rebate, volume or target schemes | Move scheme settlements to GST credit notes under section 34(1), keep the scheme letter and settlement workings, and track recipient reversal |
| Dealers and retailers receiving rebates | Reverse the credit attributable to each discount credit note in the correct return period, and keep the credit note with the return working |
| Businesses in an inverted duty structure | Revisit pending or planned refund claims under section 54(3)(ii) and the provisional refund route, using the current rules and portal |
| Exporters of goods paying IGST | Check small-value shipping bills that were set aside because of the ₹1,000 floor, within the refund time limit |
Open points to watch
- Transition. The notification has no transitional clause. Credit notes issued on or after 1 November 2026 are the safe candidates for the new wording. For a discount on older supplies, the date of the credit note, the section 34(2) limit and a documented reading of the amended clause decide the position.
- Proof of recipient reversal. The clause links the supplier's benefit to the recipient's reversal. How an officer will test this is not spelt out, so the supplier should hold confirmations and the recipient's return extract where it can.
- Rules and procedure. Refund procedure sits in the CGST Rules and portal functionality. The Rules were also amended in the same week, as reported (Notification 05/2026-Central Tax dated 27 October 2026), so read the current rule text on the CBIC tax repository before filing a refund.
- Income-tax side. A GST credit note does not decide the income-tax treatment of the rebate. The accounting entry and the deduction question are separate.
Checklist for the next three weeks
- List every rebate, volume and target scheme running for FY 2025-26 and FY 2026-27, with the basis and the settlement date.
- Separate discounts on FY 2025-26 supplies, and issue those credit notes before 30 November 2026 or the GSTR-9 date, whichever is earlier.
- Inform each recipient of the credit note and the credit to be reversed, and file the acknowledgement.
- Update the ERP so a discount credit note carries the GST adjustment and flows to the return correctly.
- Recipients: reverse the credit in the return period, and keep the reversal working with the credit note.
- Review inverted duty and small export refund files against the amended sections 54(6) and 54(14).
Frequently asked questions
What changed in GST on post-sale discounts from 1 November 2026?
Section 153 of the Finance Act, 2026 substitutes section 15(3)(b) of the CGST Act. A discount given after the supply can now be left out of the value of supply where the supplier has issued a credit note for it and the recipient has reversed the input tax credit attributable to the discount, in line with section 34. The earlier conditions of a pre-supply agreement and a link to specific invoices are no longer in the text. The provision was brought into force on 1 November 2026 by Notification No. 03/2026-Central Tax dated 26 October 2026.
Do I still need a pre-supply agreement for a post-sale discount?
Not under the wording that applies from 1 November 2026. The amended clause asks for two things only: a credit note issued by the supplier and reversal of the attributable credit by the recipient. A written scheme or letter is still sensible evidence of why the discount was given, and your commercial and income-tax records will usually need it, but it is no longer a statutory condition of section 15(3)(b).
Who reverses the input tax credit when a discount credit note is issued?
The recipient, if the recipient is a registered person who took credit on the original invoice. The supplier's tax reduction depends on that reversal, so suppliers should tell recipients about each credit note and keep a record of the communication. The recipient should reverse the credit attributable to the discount in the relevant return period; late reversal can raise questions of interest under section 50.
Is there a time limit for issuing the credit note?
Section 34(2) is not changed by these amendments. A credit note cannot be issued after 30 November following the end of the financial year of the supply, or the date of furnishing the relevant annual return, whichever is earlier. For supplies made in FY 2025-26 that outer date is 30 November 2026, or earlier if the GSTR-9 for the year is filed before that.
What changed for inverted duty structure refunds?
Section 155 amends section 54(6) so that provisional refund, up to 90% of the amount claimed, is no longer limited to zero-rated supply claims. It now also covers refund of unutilised input tax credit allowed under clause (ii) of the first proviso to section 54(3), which is the inverted duty structure. The manner and conditions are prescribed in the rules, so check the current CGST Rules and the portal procedure before filing.
Can an exporter now claim a refund of IGST below ₹1,000?
The statutory bar has been lifted for this case. Section 54(14) stops payment of a refund below ₹1,000 under section 54(5) or 54(6), and the amendment carves out refunds of tax claimed on goods exported with payment of tax. The claim must still meet the usual conditions and procedure, so a small refund is not automatic, only no longer barred by the threshold.
Does this notification bring in every GST change from the Finance Act 2026?
No. Notification 03/2026-Central Tax appoints 1 November 2026 only for sections 153 to 155 of the Finance Act, 2026. Other GST changes follow their own notifications or dates, and the notification itself carries no separate transitional provision or new forms.
We can map each scheme to the new wording, check the section 34(2) dates for FY 2025-26 supplies, and set up the monthly working for credit notes and reversals.
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This article is for general information and does not constitute advice on any specific case. Sources: Notification No. 03/2026-Central Tax dated 26 October 2026 (S.O. 5791(E)); sections 153 to 155 of the Finance Act, 2026; sections 15, 34 and 54 of the CGST Act, 2017. Rules, due dates and notifications change; confirm the current position on the CBIC tax repository and the GST portal before acting. Firm details: CA Somesh Chandak & Associates, Unit 119, 1st Floor, Centura Square IT Park, SG Barve Road, Wagle Estate, Thane West 400604. FRN 158694W.