Under the Goods and Services Tax (GST) regime in India, the supply of free samples and supplies are treated as "supply" under certain circumstances and can be subject to GST.
The GST applicability on free samples and supplies depends on the purpose and nature of the supply. The following are some scenarios where GST may or may not be applicable:
1. Free Samples: If a supplier provides free samples to customers without any consideration, then GST is not applicable on such supplies. However, if the free samples are provided as a marketing strategy and are given to promote the business or the product, then it is considered a supply and can be subject to GST.
2. Supplies Without Consideration: If goods or services are supplied without any consideration, then GST is not applicable on such supplies. For example, if a supplier provides free goods or services to charitable organizations or for disaster relief, then GST is not applicable on such supplies.
3. Supplies to Related Parties: If goods or services are supplied to a related party without any consideration, then GST is not applicable on such supplies, provided that the recipient is not registered under GST and the goods or services are not used for further supply.
4. Supplies for Promotional Activities: If goods or services are supplied for promotional activities, such as discounts, rebates, and other incentives, then the GST is applicable on such supplies.
It is important for businesses to carefully evaluate the GST applicability on free samples and supplies to avoid any penalties or legal issues. Proper documentation and record keeping is essential to demonstrate the purpose and nature of the supply, and to determine the GST liability, if any.
1. Input Tax Credit (ITC): If a supplier provides free samples or supplies without consideration and the GST is not applicable on such supplies, then the supplier cannot claim input tax credit (ITC) on the goods or services supplied.
2. Valuation of Supplies: If the free samples or supplies are considered as a supply and are subject to GST, then the value of the supply must be determined for the purpose of calculating the GST liability. The value of the supply is usually determined based on the open market value of the goods or services.
3. Delivery Charges: If a supplier provides free samples or supplies and charges for delivery or transportation, then the delivery charges are also subject to GST.
4. Record Keeping: Proper documentation and record keeping are essential to demonstrate the purpose and nature of the supply, and to determine the GST liability, if any. The supplier must maintain records of the goods or services supplied, the value of the supply, and the GST liability, if any.
5. Time of Supply: The time of supply for free samples or supplies is the earlier of the date of supply or the date on which the supplier issues an invoice. If the supplier does not issue an invoice within the prescribed time, then the time of supply is the date of completion of the supply.
Sure, here are some frequently asked questions (FAQs) on GST applicability on free samples and supplies:
A: If free samples are provided without any consideration, then GST is not applicable. However, if free samples are provided as a marketing strategy, then it is considered a supply and can be subject to GST.
A: GST is not applicable on supplies without consideration if goods or services are supplied for free to charitable organizations, for disaster relief, or to a related party without consideration.
A: No, if a supplier provides free samples or supplies without consideration and GST is not applicable, then the supplier cannot claim input tax credit on the goods or services supplied.
A: The value of supplies is usually determined based on the open market value of the goods or services supplied.
A: If a supplier provides free samples or supplies and charges for delivery or transportation, then the delivery charges are also subject to GST.
A: The supplier must maintain records of the goods or services supplied, the value of the supply, and the GST liability, if any.
A: The time of supply for free samples or supplies is the earlier of the date of supply or the date on which the supplier issues an invoice. If the supplier does not issue an invoice within the prescribed time, then the time of supply is the date of completion of the supply.
A: No, free samples are not considered as gifts under GST. They are considered as a supply and can be subject to GST.
A: The GST rate on free samples or supplies is the same as the rate applicable on the goods or services supplied.
A: Yes, GST is not applicable on free samples or supplies that are provided as a sample or a promotional item and their total value does not exceed Rs. 50,000 in a financial year.
A: If the recipient of the free samples or supplies is required to pay tax under the reverse charge mechanism, then the recipient must pay the tax on the value of the goods or services received as free samples or supplies.
A: If a supplier does not comply with the GST rules related to free samples or supplies, then they may be subject to penalties or legal action.
Reverse Charge Liability under GST Not Paid In 2018-19
ASPIRE Scheme
Taxability of personal use of asset by employee under GST
