What is ladder discount? It is a set of discounts applied one after the other on the same price, with each step taken off what is left after the step before. The trade also calls it a chain, series or compound discount, and in the market it is simply "discount par discount". Because every step works on a smaller base, the steps never add up. A ladder of 10% + 5% + 2% on ₹100 goes to ₹90.00, then ₹85.50, then ₹83.79, so the real discount is 16.21%, not 17%. The formula is net price = list price × (1 − d1) × (1 − d2) × (1 − d3), and the single equivalent discount is 100% minus that product. Distributors meet ladders every day: a company scheme, then the trade discount, then a cash discount for paying on time. The order of the steps does not change the answer. The rounding does, and that is where most bill disputes start.
Why 10 + 5 + 2 is not 17
The second discount is a percentage of the price after the first, so it is worth less than it looks. On ₹100, the 10% step takes ₹10.00. The 5% step is worked on ₹90, so it takes ₹4.50, and the 2% step is worked on ₹85.50, so it takes ₹1.71. Together that is ₹16.21 off.
This is the call every distributor has taken: "bhai, 17% bola tha, bill mein 16 kaise aaya?" Nobody cheated. The retailer added, the bill multiplied.
The formula, and a shortcut for two steps
Write each discount as a fraction left over, multiply them, and subtract from one.
- Net price = list price × (1 − d1) × (1 − d2) × (1 − d3)
- Equivalent discount = 100% − (net price ÷ list price)
For two steps there is a mental shortcut: a + b − (a × b ÷ 100). So 20 + 10 is 30 − 2, which is 28%.
| Ladder | Added up | Real discount |
|---|---|---|
| 10% + 5% | 15% | 14.50% |
| 20% + 10% | 30% | 28.00% |
| 5% + 5% + 5% | 15% | 14.26% |
| 10% + 5% + 2% | 17% | 16.21% |
| 15% + 5% + 2% | 22% | 20.87% |
| 25% + 10% + 5% | 40% | 35.88% |
Real discounts are rounded half up to two decimals.
A ₹25,000 line, worked
Take a line worth ₹25,000 at list rate, before GST, with a ladder of 12% scheme + 5% trade + 1.5% cash.
- Step 1: ₹25,000 less 12% is ₹22,000.00
- Step 2: ₹22,000 less 5% is ₹20,900.00
- Step 3: ₹20,900 less 1.5% is ₹20,586.50
The exact equivalent is 0.88 × 0.95 × 0.985, which leaves 82.346%, so the discount is 17.654%. Tally's discount column holds two decimals, so the line goes in at 17.65%. That makes the discount ₹4,412.50 and the taxable value ₹20,587.50, one rupee above the step-by-step figure. At 12% GST, CGST and SGST are ₹1,235.25 each, and the line total is ₹23,058.00.
That rupee is the whole lesson. Pick the rounded figure once, and make the bill your customer checks and the voucher in Tally use the same one. A line where the office compounds on a calculator and the bill rounds differently will not reconcile, and the payment waits until somebody explains why. Compound discount on a calculator vs on the invoice walks through where those paise go.
Ladder discount vs slab discount
Some companies use "ladder scheme" for a volume slab: buy 10 cases and get 2%, buy 25 and get 4%. That is a staircase on quantity, and only one rate applies to the bill. A ladder discount in the billing sense is several steps stacked on the same line. Read the scheme letter for which one the company means before you set up the rate.
Where GST comes in
A discount printed on the invoice at the time of supply comes off before GST, and tax is charged on what is left (Section 15(3)(a) of the CGST Act). A cash discount given later, when the retailer pays, is a post-supply discount and normally travels on a credit note, with its own conditions. Quantity discount vs cash discount under GST covers that split in full.
Putting a ladder on a Tally invoice
Tally takes one discount percentage per item line, so someone has to compound the steps and type one number. With Takkada you type up to three steps on the line from your phone, the invoice PDF prints each step under the names you chose with a Total Disc. column, and Tally receives the one aggregate in the discount field. The worked version is in ladder discount in Tally invoices, the module is at ladder discount in Tally, and naming your steps is covered in how to set up named ladder discounts.
Frequently Asked Questions
Q: Is ladder discount the same as compound discount?
A: Yes. Ladder, chain, series and compound discount all describe discounts taken one after another on a reducing price. "Discount par discount" is the same thing in market language.
Q: Does the order of the steps change the total?
A: No. Multiplication gives the same result in any order, so 5% + 10% + 2% and 10% + 5% + 2% both come to 16.21%.
Q: How do I turn a ladder into one discount for Tally?
A: Multiply the fractions left after each step, subtract the result from one, and round to two decimals. For 10% + 5% + 2%, that is 1 − (0.90 × 0.95 × 0.98), which is 16.21%.
Q: Is a ladder discount charged before or after GST?
A: Before, when it is printed on the invoice at the time of sale. GST is worked on the value left after every step.
Talk to us
WhatsApp us at https://wa.me/919435977777 with one of your scheme letters and we will show you the bill it produces.