GST Rate on Gifts, Free Sample, and Other Promotional Offers
After lockdown businesses are attempting all potential strategies to draw in customers. Quite possibly the most widely recognized methodologies here is to provide gifts, free examples, and other promotional offers. Now the main question is that how these gifts, free samples, and other promotional offers are taxed under GST? So, in this blog we will answer all your queries related to the GST rate on gifts, free sample, and other promotional offers:
GST On Free Samples and Gifts
Many taxpayers regularly give free samples or gifts to customers and as per GST law, any goods or/and services that are provided free of cost don’t qualify as ‘supply‘ under GST.
Further, as per section 17(5)(h), a taxpayer cannot claim Input Tax Credit (ITC) for goods lost, obliterated, stolen, written off, or conveyed as gifts or free samples.
However, in case if such distribution falls under the definition of supply as mentioned in Schedule I of the GST act, such taxpayer can claim ITC on such supply of free samples or gifts.
GST Rate on Other Promotional Offer
BOGO (Buy One Get One) or Buy One Get Two/Three
We have seen several ads such as ‘Buy one sanitizer, get one free’. At first look, it might give the idea that one thing is being provided free of cost. However, in this sort of offer, we need to get that at least two individual supplies are clubbed, and a single cost is charged for the whole supply. In other words, we can say that the supplier is supplying two goods at the cost of one.
Thus, we can conclude from the above statement that GST is applicable when different supplies are clubbed together at a single cost. In any case, the tax rate will rely upon the kind of supply (mixed or composite supply). Moreover, the CBIC has explained that the taxpayer can claim ITC on inputs, input services, and capital goods utilized for supplying such goods or services.
Discounts
At times, suppliers offer discounts on the purchase of a certain amount of goods. The CBIC has explained that such limits offered by the suppliers to customers ought to be excluded while deciding the supply value (given terms and conditions are fulfilled). Moreover, the CBIC has explained that the taxpayer can claim ITC on inputs, input services, and capital goods utilized for supplying such goods or/and services.
GST Rate on Secondary Discounts
As per the clarification issued by the CBIC, at the time of deciding the supply value, secondary discounts shall also be excluded. However, the taxpayer can claim ITC on inputs, input services, and capital goods utilized for supplying such goods or/and services.
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