How to Treat Discounts on Supplies in Oman VAT?

Yarab A | Updated on: May 30, 2022

How to treat discount in Oman VAT?
Example of discount in Oman VAT
How TallyPrime Helps?

Discount is one of the businesses' widely used strategies to boost sales. In this process, the seller reduces the discount from the gross or total price, and the buyer pays only the net amount. A discount is a direct reduction in the sales price that helps businesses to:

Attract the customers
Lure the buyer into buying more
Make on-time or early payment

Providing discounts is not new for businesses, but with VAT in Oman, how to treat the discount might be the common question most businesses might have. To be precise, you might want to know should VAT be charged on the value after the discount? Or on the total value of supply without considering the discount?

Let us understand the provisions related to discount in Oman VAT

How to treat discount in Oman VAT?

The Oman VAT provides the guidelines on how to treat discounts provided on the supply of goods and services. Any discount or reduction granted by the supplier will not be included under taxable value. In simple words, VAT will be charged on the net value arrived after the discount.

VAT Treatment on Gifts and Free Samples in Oman

Composite and Multiple Supplies in Oman VAT

For example, the supply value is 20,000 OMR, and the discount is 100 OMR. In this case, the taxable value of supply will be 19,900 (20,000 - 100), on which the VAT will be charged.

Though the VAT regulation excludes the discount from taxable value, certain conditions need to be met. The following are discount conditions:

The value of the granted discount or reduction is mentioned in the tax invoice
The supplier has a clear policy concerning discounts and reductions

The above conditions are quite clear that the discount needs to be written on the invoice and, more importantly, the supplier has a policy related to the discount.

Example of discount in Oman VAT

National Spares Ltd is a dealer in automotive spare parts. They introduced a clearance sale with a 5-10% discount on certain spare parts to clear the old stock.

National Spares sells accessories worth 10,000 OMR to Abdul Automobiles. They also provide a discount of 5% on the price, as part of the clearance sales scheme.

Invoice
Sl.No	Description of Goods	Quantity	Rate	Per	Amount
1	Spare Parts	100	1000	Nos	10,000
	Discount 5%				-500
	VAT @5%				475
	Total	100			9,975

In the invoice,

Spare parts value is 10,000 OMR
Discount of 5%, i.e. 500 OMR, is reduced from the of value supply
VAT is charged is on 9,000 OMR (10,000 -500 * 5% VAT)

From the above example, it is clear that the VAT will only be charged on value after discount. As a result, we foresee that the existing business practice of providing discounts will continue without any changes as long as you meet the discount conditions mentioned above.

How TallyPrime Helps?

TallyPrime, a business management software in Oman is now enhanced to support Oman VAT. TallyPrime makes the process of VAT compliance seamless and efficient. With TallyPrime, all you need to do is 3-4 simple steps to get started. Using TallyPrime, you can record and generate tax invoices, print bilingual tax invoices, manage all types of supplies, generate Vat accurate returns and much more.

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