If you offer volume discounts, you may be able to adjust the GST and QST payable by the customer. This will depend on when the discount is granted.
If the discount is granted at the time of sale, you must bill the GST and QST on the discount price (the sale price minus the discount).
You sell tables and chairs to a customer and provide a 10% discount on the price.
|10 tables at $150.00 each||$1,500.00|
|40 chairs at $50.00 each||+||$2,000.00|
|GST ($3,150 × 5%)||+||$157.50|
|QST ($3,150 × 9.975%)||+||$314.21|
Some volume discounts are granted after the sale is made and the GST and QST are collected. This type of discount is granted to the customer at the end of a set period, such as one year.
In such a case, you can adjust, refund or credit the GST and QST related to the discount. If you choose to adjust the taxes, you must do so:
- during the reporting period in which the discount was granted; or
- within four years after the end of that period.
As a rule, you must also issue a credit note to the customer specifying the amount of the discount and the amount of adjusted, refunded or credited taxes. However, a credit note is not necessary if the customer provides you with a debit note containing this information. In this case, the GST and QST collected do not change, but you can subtract an amount equal to the reduction of taxes in the calculation of your net tax. If the customer is a registrant, the input tax credit (ITC) and input tax refund (ITR) to which the customer is entitled will be reduced by an amount equal to the reduction of taxes.
In certain circumstances, you may not want to adjust the taxes, such as when a registrant purchaser has already claimed an ITC and an ITR for the amounts. If you decide not to make the adjustment, the GST and QST must not be included in the discount, and a credit or debit note need not be provided.