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GST on free samples

This question I faced many times from my clients and colleagues because there is no special provision on this, but if you read section 7, schedule I & section 17(5) together then this confusion will crystal clear. Now let us understand how ?

Question: Is GST levied on free samples?

Answer: This question I faced many times from my clients and colleagues because there is no special provision on this, but if you read section 7, schedule I & section 17(5) together then this confusion will crystal clear. Now let us understand how ?

According to section 7 Supply includes:

  • All forms of supply of goods or services or both made or agreed to be made for a consideration by a person in the course or furtherance of business;
  • Activities specified in schedule I, made or agreed to be made without a consideration.

Now as per schedule I- following activities to be treated as supply even if made without consideration:

  • Permanent transfer or disposal of business assets where ITC has been availed, But as per section 17(5) ITC on free samples are not allowed, therefore we can conclude that this point is not able to clear confusion of taxability on free samples;
  • Supply of goods or services or both between related persons or distinct person (as specified in section 25)(which states that a person who is required to take registration in one or more state is considered as distinct person), when made in the course or furtherance of business if exceeds Rs 50,000 therefore we can conclude that this point is clears that supply without consideration made to related person is considered as supply , so we can say that supply made without consideration to unrelated person will not treated as supply.

Conclusion: GST will not be levied on free samples distributed, because it is not considered as supply also, ITC on such purchases are not allowed to supplier.

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View Comments (11)

  • i (in gujarat) want to attend exhibition in noida, i have to carry pamplets, diaries, flyers, carry bags for the exhibition. Now I want to generate Eway bill for these goods for exhibition purpose and not for sales purpose and have no commercial value. My question is all these will carried in my own car, do i need to prepare eway bill (yes there is option in eway bill for exhibition purpose) and if yes then what will be transporter details? i.e. transporter id?

  • But Sir, As per para 4, clause (a) of Schedule II of CGST Act, it states that "Where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person", So after interpreting the above para it is prominent that Samples as they are forming part of Inventory (i.e. Assets of the Business) is disposed and this will be treated as Supply of Goods even if transferred for free.

  • I import some material as sample after paying duty and IGST. I treated as zero value. can i claim IGST AMOUNT AS ITC

  • There is no clarity on this issue because law says ITC will not be entitled. As per your reply this will relates only in case of supply to related persons is ok but in law it is not clear.

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