FOC Supply – Taxability and input tax credit under GST.

FOC supply under Model GST law-

First understand what is free of cost supply with the help of following examples-

1. Suppose X private limited sends goods say laptops  to y private limited without any charging any money.
2. Suppose a CA A files the income tax return of another person B without charging any fees.

Now, What shall be covered under supply is defined under section-3 of GST law. The said section however does not provide clarity in case free of cost supply. However, among other things in this section, it is also written that matters listed in schedule-I shall be treated a supply of goods and services . Schedule-I clearly states the matters to be treated as supply even if made without consideration .

Now to get more clarity ,let’s see pt. 2 of the said schedule, which states “Supply of goods or services between related persons, or between distinct persons as specified in section 10, when made in the course or furtherance of business”.  The said line means even if there is no amount received against such supply, It shall be treated as supply and hence liable to GST.

Hence to conclude we can say that free of cost goods and/or services shall be treated as supply and hence taxable.