Taxability of free samples under GST

There has been a lot of buzz and rumors lately surrounding GST with many false claims doing the rounds. Also there is a lot of confusion regarding taxability of goods distributed as free samples. What is the truth? Lets find out

The model GST law released in June 2017 specified the meaning and scope of supply which was extremely wide and broad.

It covered every supply made by a registered person even without consideration in furtherance of business.

This means, if a registered person (turnover greater than Rs 20 L/Rs 10 L) is making a supply in course of furtherance of business, it will be deemed as supply and liable to GST.

As a result of this, all the samples distributed by a registered person will be charged to GST. It had a major impact on FMCG industries as they are generally involved in distribution of samples for advertisements and feedback. GST on these transactions was a great setback for the industry.

However, the GST council took cognizance of this and problem was solved in the Central Goods and Services Tax Act 2017 which provided relief to taxpayers by modifying the Schedule 1 of Section 3(1)(C) .

The scope of schedule 1 is now restricted only to :

· Permanent transfer or disposal of business assets on which ITC has been availed

· Import of services from a related person or distinct person as specified in Section 25

· Supply of goods or services by Principal to agent , agent to principal , between related persons or distinct persons.

This means any supply made by a taxable person to his agent or principle or among related parties will be liable to GST but distribution of goods or rendering of services by FMCG industry or any other industry as such to the registered or non registered persons for advertisement, sale promotion or feedback will be exempt.

This has cleared all doubts regarding the taxability of free samples and it can be safely concluded that free samples distributed for advertisement or other purposes shall not attract GST.

However, it must be clearly noted that Section 17(5)(h) of the IGST ACT Provides that no input tax credit is available if goods lost, stolen, destroyed , written off or disposed off by way of gift or free sample.

Thus, Input tax credit on inputs & services used in free sample should be reversed.

Similar Ripples

Questions

There is no question

Taxability of free samples under GST

Write your Comment

Would you like to edit this news ? Edit

Select Format

You get opportunity to take 30 day Challenge program.

Optional

Advanced

You get opportunity to take 30 day Challenge program.

Optional

Add tags

You get opportunity to take 30 day Challenge program.

Optional

PUBLISH IT

Don't sell
PUBLISH IT
Publish privately
SAVE AS DRAFT

Dont't publish now

The model GST law released in June 2017 specified the meaning and scope of supply which was extremely wide and broad. It covered every supply made by a registered person even without consideration in furtherance of business. This means, if a registered person (turnover greater than Rs 20 L/Rs 10 L) is making a supply in course of furtherance of business, it will be deemed as supply and liable to GST. As a result of this, all the samples distributed by a registered person will be charged to GST. It had a major impact on FMCG industries as they are generally involved in distribution of samples for advertisements and feedback. GST on these transactions was a great setback for the industry.However, the GST council took cognizance of this and problem was solved in the Central Goods and Services Tax Act 2017 which provided relief to taxpayers by modifying the Schedule 1 of Section 3(1)(C) .The scope of schedule 1 is now restricted only to :·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permanent transfer or disposal of business assets on which ITC has been availed·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Import of services from a related person or distinct person as specified in Section 25·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Supply of goods or services by Principal to agent , agent to principal , between related persons or distinct persons.This means any supply made by a taxable person to his agent or principle or among related parties will be liable to GST but distribution of goods or rendering of services by FMCG industry or any other industry as such to the registered or non registered persons for advertisement, sale promotion or feedback will be exempt.This has cleared all doubts regarding the taxability of free samples and it can be safely concluded that free samples distributed for advertisement or other purposes shall not attract GST. However, it must be clearly noted that Section 17(5)(h) of the IGST ACT Provides that no input tax credit is available if goods lost, stolen, destroyed , written off or disposed off by way of gift or free sample. Thus, Input tax credit on inputs &amp; services used in free sample should be reversed.

The model GST law released in June 2017 specified the meaning and scope of supply which was extremely wide and broad. It covered every supply made by a registered person even without consideration in furtherance of business. This means, if a registered person (turnover greater than Rs 20 L/Rs 10 L) is making a supply in course of furtherance of business, it will be deemed as supply and liable to GST. As a result of this, all the samples distributed by a registered person will be charged to GST. It had a major impact on FMCG industries as they are generally involved in distribution of samples for advertisements and feedback. GST on these transactions was a great setback for the industry.However, the GST council took cognizance of this and problem was solved in the Central Goods and Services Tax Act 2017 which provided relief to taxpayers by modifying the Schedule 1 of Section 3(1)(C) .The scope of schedule 1 is now restricted only to :·       Permanent transfer or disposal of business assets on which ITC has been availed·       Import of services from a related person or distinct person as specified in Section 25·       Supply of goods or services by Principal to agent , agent to principal , between related persons or distinct persons.This means any supply made by a taxable person to his agent or principle or among related parties will be liable to GST but distribution of goods or rendering of services by FMCG industry or any other industry as such to the registered or non registered persons for advertisement, sale promotion or feedback will be exempt.This has cleared all doubts regarding the taxability of free samples and it can be safely concluded that free samples distributed for advertisement or other purposes shall not attract GST. However, it must be clearly noted that Section 17(5)(h) of the IGST ACT Provides that no input tax credit is available if goods lost, stolen, destroyed , written off or disposed off by way of gift or free sample. Thus, Input tax credit on inputs & services used in free sample should be reversed.

Hi Thakurani,
I want to withdraw in my Thakurani wallet
Thanks,

Select the reason for validity check

I feel great..the news is still good.please give the reason too..thanks..

Why do you think the News as invalid?” Please mention the reason.

I appreciate your effort. May I request you to select one of the reasons from below.
I am marking this post and your reason to Thakurani Moderators. They will take appropriate action.
Thanks,

Write your reason

My Dear ,

Harassing

Spam

Ingenuine

Rotten

Alien

Plagiarism

Unformatted

Taxability of free samples under GST