CA Akash Mittal

CA Akash Mittal

Model GST Law was released in the Month of June 2016 wherein Meaning and scope of supply was given in Section 3 of Law. Section 3(1)(c) stated that goods or services delivered even without consideration will be treated as supply provided it is covered in Schedule I. Heading of Schedule I was MATTERS TO BE TREATED AS SUPPLY EVEN WITHOUT CONSIDERATION. V point of Schedule stated that supply of goods or services to another taxable or non taxable person even without consideration will be treated as supply. Scope of this point was very wide. It meant that any supply made by any registered person free of cost will be charged to GST if it is made in the course of business. As a result of this clause, all the samples distributed by a registered person will be charged to GST. It has a major impact on FMCG industries as they are generally involved in distribution of samples for advertisements and feedback. GST on these transactions was a great setback for the industry.

However, Central Goods and Services Tax Act 2017 provided relief to the industry. Scope of Schedule I is now restricted only to permanent transfer or disposal of business assets on which ITC has been availed, Import of services from a related person or distinct person as specified in Section 25 (i.e. entities having same PAN) and supply of goods or services by Principal to agent , agent to principal , between related persons or distinct persons.

This means that any supply made by a taxable person to his agent or principal as case may be or among related persons will be charged to GST. However, distribution of goods or rendering of services by FMCG industry or any other industry as such to the registered or non registered persons for advertisement, sale promotion or feedback will be exempt.

While discussing this, it cannot be ignored that Section 17(5) clearly states that ITC will not be allowed in respect of goods distributed as free samples or gift.

Thus, it can be concluded that on free samples GST is not charged by the Act however it prohibits ITC on same.

In case of any query, feel free to contact at +91-9999201920 or mail at akash01mittal@gmail.com.

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7 responses to “Taxability of free samples under GST”

  1. hari says:

    If I bought 100 unit from a supplier at the cost of Rs 10 per unit so total purchase price is 1000. But he will give me 50 unit free. So he will collect GST for 100 units or 150 units ?

    While I am selling on my retailer shop for 2 units. ( unit price is 20 Rs. So I will charge Rs 40 for 2 units) I will give 1 unit free to my customers along with 2 units.How much GST I have to collect from my customers?

  2. Amit Kapadia says:

    In gst invoice we sell free goods like 10+2 or 3+1 is there any gst on free goods.

  3. Anil Kumar says:

    Dear Sir,

    We are into healthcare (medical devices) industry. Everymonth, we provide some samples for promotions to our staff and dealers. Kindly inform how the same is treated in GST Regime.

    • Sivakumar.R says:

      Anil you can give it as sample subject to following.
      1.You should declare the value, which should be same that of your purchase value.
      2.You have to remove the credit value of the product you have given as samples.
      example.
      purchase – 100 qty * 100 (taxable vlaue) =10000
      tax @ 28% = 2800
      ———–
      128000

      tax credit = 2800 ( Rs.28 per unit)

      I have sold 10 units @ 150 = 1500
      tax @ 28% 420

      tax credit now will be 2800-420 = 2380

      Sample given to 5 persons – = Value – 500.00

      tax credit now = 2380- (28*5)=140=2240

      i think i am clear.

  4. RK says:

    Hello Ji ,

    Now already GST Laws passed and Act got assent ..

    You are still starting with

    Model Law …..States this and that

    Ufff

  5. Prateek Bharate says:

    Dear sir,
    In simple words you have explained about Taxability of free samples under GST.

    We have 2 queries:-
    1. We are buying goods from Exempt Unit in Maharashtra. Whether we will get any credit on the Closing Stock of such goods.
    2. When we buy goods from such Unit following declaration is there on Invoice.
    (I/We hereby declare that sale of goods evidenced by this invoice is exempt from the whole of sales tax in my/our hands on account of the Certificate of Entitlement bearing No. _ duly granted to me/us and as such my/our immediate purchaser shall not be entitled to claim any set-off in respect of this transaction under any provision of Maharashtra Value Added Tax Act, 2002 or the rules framed there under and that the transaction shall be accounted for in the turnover of sales while filing my/our return.)

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