JOIN US Free samples and gifts offered with purchases as well as popular ‘buy one get one free’ deals may attract the proposed Goods and Services Tax (GST) levy.
The model GST law, which would be rolled out from April next year, was unveiled by the government last week for stakeholders’ comments. It says that any supply sans consideration will attract tax. This would cover free gifts and samples as well as buy one get one free deals, tax experts said.
Section 3 of the GST law defines a supply of goods and services to include those “made or agreed to be made without a consideration”.
Under Schedule-1 for ‘Matters to be Treated as Supply Without Consideration’, the law further goes on to define them as “supply of goods and/or services by a taxable person to another taxable or non-taxable person in the course or furtherance of
business”.
Simply put, buyers will have to pay GST on articles they receive free.
“GST will be entirely based on the concept of ‘supply’,” said Rohit Jain, partner, Economic Laws Practice.
KPMG India national head (Indirect Tax) Sachin Menon said, “This will impact the sales and marketing cost of companies that follow the system of free samples or free supply strategy.
Presently, for a free sample of goods, excise duty is payable, but VAT/CST is not payable.