The term ‘Discount’ typically represents reduction of cost of goods or services and is offered by businesses to augment such supplies. Discount can occur and can be provided by the business either prior to sale or post-sale and therefore lies the concept of pre-sale or post-sale discount. While post-sale discount may also be interchangeably referred to as ‘rebate’ as it means the same thing – that is to pay back part of an amount already paid to buy something. Also, when a transaction occurs at a B2B level, rebate is also referred to as ‘incentives’ or ‘commission’ in a colloquial way.
While, without an iota of doubt we are clear about the understanding of the impact of pre-sale discount under Value Added Tax (VAT), however post-sale discount makes for an interesting case to discuss. Post-sale discount is usually part of offering by the Automobile, FMCG and Pharma sector companies. The dealer receives such post-sale discount from the companies either in the form of price support for slow moving items or as part of promotional offer to generate sales volume with respect to a given product. Further, there could be conditions attached to such receipt of post-sale discount by the dealers –
1) to pass on the benefit to ultimate customer;
2) keep the benefit with them.
Let us analyze the impact of such post-sale discount under UAE, KSA and Indian VAT laws.