To show a discount on a GST invoice correctly, apply it per item so it reduces that line’s taxable value before GST is worked out — then the CGST/SGST (or IGST) is charged on the lower amount. You never charge tax on the part you gave away. This guide shows how a discount appears on a GST bill, the one rule that keeps it compliant, and a worked small-shop example that adds up cleanly.
The one rule: discount lowers the taxable value first
Under Section 15(3) of the CGST Act, a discount given before or at the time of the supply is excluded from the value of the supply if it is duly recorded on the invoice for that sale (see the CGST rules on cbic.gov.in). In plain terms for a shop:
- Take the item’s price.
- Subtract the discount shown on the bill.
- That discounted figure is the taxable value.
- GST is charged on the taxable value — not the original price.
So the order is always price → minus discount → taxable value → GST. Because the discount is recorded on the invoice, it lifts out of the value cleanly and no tax sits on it.
Where the discount goes on a GST invoice
The safe place for a discount is against the line item, not scribbled at the bottom. A per-line discount keeps the maths transparent: anyone reading the bill can see the item price, the discount, the reduced taxable value, and the tax on it. That is exactly what “duly recorded on the invoice” means.
A tidy item table looks like this:
| Item | Rate | Qty | Gross | Discount | Taxable | GST @18% | Amount |
|---|---|---|---|---|---|---|---|
| Umbrella | 300 | 2 | 600 | 100 | 500 | 90 | 590 |
| Raincoat | 600 | 1 | 600 | 100 | 500 | 90 | 590 |
Each line shows its own discount and its own tax, so the bill is self-checking.
A worked example (monsoon sale in Lucknow)
Meena runs a general store in Lucknow, Uttar Pradesh. A regular customer, also in Uttar Pradesh, buys during the monsoon:
- 2 umbrellas at ₹300 each = ₹600, with a ₹100 line discount → taxable ₹500.
- 1 raincoat at ₹600 = ₹600, with a ₹100 line discount → taxable ₹500.
Because both the shop and the customer are in Uttar Pradesh, this is an intra-state sale, so the 18% GST splits into CGST 9% + SGST 9%.
- Total taxable value = ₹500 + ₹500 = ₹1,000
- CGST 9% of ₹1,000 = ₹90
- SGST 9% of ₹1,000 = ₹90
- Invoice total = ₹1,000 + ₹90 + ₹90 = ₹1,180
Re-add the columns and it ties out: line amounts ₹590 + ₹590 = ₹1,180, and taxable ₹1,000 plus ₹180 total GST = ₹1,180. Round-off is ₹0 here.
Notice what the discount did. Without it, the taxable value would have been ₹1,200, the GST ₹216, and the total ₹1,416. Recording the ₹200 discount on the bill lowered the taxable value to ₹1,000, so the customer pays GST only on what they were actually charged — ₹236 less overall.
For how the CGST/SGST versus IGST split is decided in the first place, see CGST, SGST and IGST — the difference.
Discount at the counter vs discount after the sale
The example above is the everyday case: a discount you decide at billing time and print on the bill. That is the simple, safe path and it’s what most kirana and retail shops use.
A post-sale discount (for example, a year-end volume rebate agreed later) is a different animal. Excluding it from the taxable value carries extra conditions, usually involving a credit note and how the buyer’s input tax credit is handled — and these rules have been changing recently. Don’t treat a later rebate like a counter discount; confirm the current position on cbic.gov.in or with your CA before you adjust tax on it.
One thing that never changes: you do not charge GST on the discount amount. Whether at the counter or later, the discounted rupees leave the taxable value; tax applies only to what the customer pays for the goods before tax.
Inclusive prices and discounts
If you price inclusive of GST (the shelf price already contains tax, like MRP), apply the discount to the price the customer pays, then let the reverse calculation pull the taxable value and tax back out of that reduced figure. The principle is identical — the discount comes off first. See GST-inclusive pricing for retail products for the reverse-calculation method.
Doing this without arithmetic slips
The discount rule is simple, but doing it by hand on every bill — subtract the discount, find the taxable value, split the tax, round the total — is exactly where a busy counter loses money or overcharges GST.
Yojika handles it for you. It’s offline-first GST billing software for Indian small shops: you set a per-line discount on any item and it lowers that item’s taxable value before working out the CGST/SGST or IGST automatically from the place of supply. The discount prints clearly on the bill (A4, A5, or a thermal receipt) in any of the 22 official Indian languages, and your business data stays on your own PC.
- See what’s included on the features page.
- Check simple, transparent pricing.
- Or download Yojika and try it free for 14 days.
New to GST bills altogether? Start with our GST invoice format for small shops guide.
This article is general information, not tax advice. GST rules and thresholds change — confirm the current position on gst.gov.in or with your CA.