Experts flag input tax credit blockage for FMCG distributors despite GST relief
GST
Dated:- 28-9-2025
PTI
Kolkata, Sep 28 (PTI) The government\u2019s recent circular has brought clarity on trade discounts and credit notes under the GST regime, but has shifted compliance obligation and cash-flow pressure onto FMCG distributors, experts said.
\nIndirect Tax Expert at LexVed Vedika Agrawal said the GST circular 251 makes it clear that financial or commercial credit notes – those issued without GST – do not require distributors to reverse their input tax credit (ITC).
\nInput tax credit is the tax a business unit pays on its purchases, which it can claim back to lower the tax it owes when it sells products or services.
\n\u201cFor manufactur<\/p>\n
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\n\u201cAfter the amendment, GST credit notes can be issued even without a pre-sale agreement or invoice linkage. This will ensure that accumulated input tax credit doesn\u2019t remain blocked at the recipients\u2019 end, since ITC reversal at the recipient\u2019s end would be required once the supplier adjusts the output tax. The problem will persist for about a year until this amendment takes effect,\u201d he said.
\nThe circular also clarified the treatment of trade discounts, Agrawal said.
\n“Where manufacturers only support dealer pricing, no extra GST arises. But if they directly promise a lower price to consumers, dealers m<\/p>\n