What Is a Pre-Supply Discount?
A pre-supply discount is a price reduction given before or at the time of a sale and shown on the invoice, so GST is charged only on the reduced price.
The rule is section 15(3)(a) of the CGST Act: the value of a supply does not include a discount given “before or at the time of the supply if such discount has been duly recorded in the invoice”. In festive weeks, when Diwali offers fill shop windows, the invoice requirement decides whether an offer actually lowers the GST.
The Two Conditions
A discount comes off the taxable value at the time of sale only when both hold:
- Timing. It is agreed before or at the moment of the sale, not handed back afterwards.
- On the invoice. It appears on the bill itself, either against the item as a line item discount or as a reduction on the whole bill. A discount that applies only when a set is bought together can make the set look like one price, so check that case with your CA.
Miss either one and GST stays on the value the invoice records, even if the customer paid less at the counter. A lower item price printed on the invoice works just as well as a discount line. For a business buyer, the printed discount also lets their accountant match your invoice to the order they placed.
Pre-Supply vs Post-Supply Discount
Discounts given after the sale follow a separate clause, and the paperwork is heavier.
| Aspect | Pre-supply discount | Post-supply discount |
|---|---|---|
| When | Before or at the sale | After the sale |
| Paperwork | The invoice itself | An agreement made before the sale, linked to the invoice |
| Buyer’s side | Nothing extra | Registered buyer reverses matching credit |
| Typical case | Diwali offer at the counter | Year-end rebate to a dealer |
For the post-supply route, section 15(3)(b) currently requires the discount to be agreed at or before the sale and linked to specific invoices, with the buyer reversing the matching input tax credit.
The Finance Act, 2026 substitutes a simpler version built on a credit note, but CBIC’s text shows it as effective from a date yet to be notified, so check which version applies when you give the discount. Our page on the GST credit note covers how that document works.
Pre-Supply Discount Example
A family restaurant on Satna’s Rewa Road runs a 15% Diwali offer on dinner bills in the week before Diwali, which falls on 8 November in 2026. One table’s food comes to Rs.3,600.
| Route | What the bill shows | Value GST is charged on |
|---|---|---|
| On the bill | Rs.3,600 less Rs.540 Diwali offer | Rs.3,060 |
| Given later | Rs.3,600, with Rs.540 paid back as cashback a week later | Rs.3,600, unless the post-supply route applies |
Note: this is an invented example for illustration only. The restaurant and amounts are not real.
The guest saves Rs.540 either way. But on the first route GST is charged on Rs.3,060, while on the second the bill was already raised at Rs.3,600, so the tax stays on the full amount unless the cashback qualifies under the post-supply route. A walk-in guest has no input tax credit to reverse, so that part of the test is not the obstacle. Whether the cashback was agreed before the sale and linked to the bill is, and that is worth a word with your CA.
Where Offers Go Wrong
Most of the trouble sits between what the counter says and what the bill prints:
- Cash comes off at the counter while the printed invoice still shows the full price.
- The offer is on the poster but not set up in billing, so some bills show it and some do not.
- A promised cashback is treated as a discount on the original bill, when it is really given after the sale.
And none of these change what the guest pays. They change the value GST is charged on, and whether your records can prove it. Before the festive rush, print one discounted test bill and check that the discount line is there.
Put the Pre-Supply Discount on the Bill
For restaurants, Petpooja POSS lets you easily apply discounts and coupons, so the festive offer is applied as part of billing rather than by hand. Discount caps are available on the Android POS version. Our discount calculator helps you test what an offer costs before it goes live.
Our guide to types of restaurant discounts covers which offers suit which outlet.
Frequently Asked Questions
No. A discount reduces the price of the goods or service, and GST is then charged on that reduced price at the normal rate. Cutting only the GST line would leave tax under-collected.
Yes. A 10% offer on a Rs.2,000 food bill, shown on the bill, means GST is worked out on Rs.1,800.
No. It works the same for a walk-in customer and a registered business buyer, because the discount simply reduces the invoice value.
It depends on how the points are set up. The treatment is not settled, so check the scheme’s structure with your CA before assuming points redeemed at the counter cut the taxable value.
