GST Applicability on Free Samples Supplies

When it comes to the applicability of GST on free samples and supplies, there is a lot of confusion among business owners and start-up founders in India. Many people believe that GST is not applicable on free samples and supplies, while others are of the opinion that it is. In this article, we will discuss the applicability of GST on free samples and supplies in detail.

What are free samples and supplies?

Free samples and supplies are products or goods that are given away for free by businesses to promote their products or services. It is a common practice among businesses to offer free samples and supplies to potential customers to create brand awareness and to encourage them to try their products.

Is GST applicable on free samples and supplies?

According to the GST law, any supply of goods or services made for a consideration is taxable under GST. However, when it comes to free samples and supplies, the issue becomes a bit more complicated.

As per the GST law, any supply made without consideration is not taxable under GST. This means that if a business gives away free samples and supplies without any consideration, GST will not be applicable on it.

When is GST applicable on free samples and supplies?

However, there are certain situations where GST is applicable on free samples and supplies. Let's take a look at these situations:

Supply to related parties: If a business supplies free samples and supplies to its related parties such as its employees, directors, or shareholders, then GST will be applicable on it. This is because, as per the GST law, any supply made to a related party is considered to be a taxable supply.
Supply as a part of a promotion: If a business supplies free samples and supplies as a part of a promotion, then GST will be applicable on it. For example, if a business offers a buy-one-get-one-free offer, then GST will be applicable on the free product given away as a part of the offer.
Supply of branded goods: If a business supplies free samples and supplies of its branded goods, then GST will be applicable on it. This is because, even though the goods are being given away for free, they are being used for promotional purposes and are branded with the company's name or logo.

Conclusion

In conclusion, the applicability of GST on free samples and supplies depends on the situation in which they are being supplied. If a business is giving away free samples and supplies without any consideration, then GST will not be applicable on it. However, if the free samples and supplies are being supplied to related parties, as a part of a promotion, or are branded goods, then GST will be applicable on them.