VAT on supplier rebate


We are receiving Volume-based rebates from our supplier. Should we issue him invoice for this or he should issue us a tax credit note?


The above agreement is understood as a “Volume Based Rebate” agreement where your supplier is agreeing on giving a discount on achieving a volume target. This should be followed by a Tax Credit Note from your supplier. As this is not a supply from customer to its supplier hence there is no need for issuance a tax invoice by the customer. Had it been a commission agreement, then it would have been construed as a service provided by the customer to the supplier.

The supplier would issue you a tax credit note and you can accordingly adjust your input VAT based on the credit note.