GST- Impact on Marketing Strategies 

♣ Free Sample/ Gift

♣ Tie in Goods

♣ Buy 2 get 1 Scheme

Impact on Marketing Strategies – Free Samples

> Free supplies are liable to excise duty, while under the VAT laws, free supplies requires reversal of input tax credit;

> Under the GST law, the treatment would be similar to the present VAT laws, where the supplies are made without any consideration (monetary/ otherwise).

Impact on Marketing Strategies In GST – Free Samples 

Read Para 1 of schedule I with sec 17 (5)(h) of CGST Act, 2017 

Schedule I of CGST ACT,2017- Activity to be treated as supply even when if made without consideration.  

1. Permanent transfer/ disposal of business assets where input tax credit has been availed on such assets.

Sec 17(5) (h) of CGST ACT, 2017

(5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples;

Impact on Marketing Strategies – Free Samples

> Donation of business assets or scrapping or disposal in any other manner (other than as a sale – i.e., for a consideration) would qualify as ‘supply’ under clause 1 of schedule-I, where input tax credit has been claimed on the same.

> Free sample/ gift is not cover under this clause because credit is not admissible on free sample and gift.

> Free sample/ gift will not be subjected to GST but input tax credit will have to be reverse.

Impact on Marketing Strategies –Tie –In goods/ Buy one get one free

Section 2(74)

Mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply

Examples: Supply of soap bars where soap boxes are given free of cost; supply of wheat for which a bottle of honey is given free of cost. In the above example of honey being supplied with wheat, both wheat and honey will be taxed at the rate of tax applicable for honey (being commodity taxed at higher rate).

Sec -8 of CGST ACT, 2017

a mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.

What is Composition Scheme Under GST

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3 responses to “Impact of GST on marketing strategy”

  1. Mathew John says:

    The reference in section 17(5) (h) appears to be to goods at input stage and not to final goods distributed free. The the entire section “goods” is used to refer to goods used as input and not as final product. Reversal of credit on inputs where final products are not suffering GST is dealt with in 17(2) and ITC Rules. The question whether final products distributed free will be taxable needs closer examination

    • caamitkumar says:

      Dear sir,
      You may be correct but permanent transfer or disposal of business assets shall be liable to GST where input tax credit has been availed on such good.
      We should wait for interpetation of word “such good”.

      Thanks for your valuable comments
      I want to in touch with you on Gst issues .

      • caamitkumar says:

        Sir sec 17(2) deal where input used party for business purpose and partly for personal perpose.

        But sec 17 (5) (h) cover the situation where input use fully for non business purpose.


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