Goods and Services Tax (GST) is a consumption tax that is applicable on the supply of goods and services in India. The GST law provides for various exemptions and special provisions for different types of transactions, including the supply of free samples. In this article, we will explore the applicability of GST on free samples and the relevant provisions under the GST law.
What are Free Samples?
Free samples are goods or services that are provided by a supplier to a recipient without any consideration or payment. The purpose of providing free samples is to promote the products or services of the supplier and to generate interest among potential customers. Free samples can be provided in various forms such as trial packs, small quantities of goods, or complimentary services.
Applicability of GST on Free Samples
Under the GST law, the supply of goods or services without consideration is not considered as a “supply” for the purposes of GST. Therefore, the provision of free samples by a supplier to a recipient does not attract GST if the following conditions are met:
- The supply of free samples is made in the course of business.
- The recipient is not required to provide any consideration or payment for the supply of the free samples.
- The free samples are supplied in quantities that are necessary to promote the goods or services of the supplier.
If these conditions are met, the provision of free samples is not subject to GST, and no tax needs to be paid on the supply of free samples.
However, if the supply of free samples does not meet the above conditions, it may be treated as a taxable supply and may attract GST. For example, if the free samples are provided in quantities that exceed what is necessary for promoting the goods or services of the supplier, the supply may be treated as a taxable supply and may attract GST.
Input Tax Credit on Free Samples
Input Tax Credit (ITC) is a mechanism under the GST law that allows a registered person to claim credit for the GST paid on purchases made for business purposes. However, the GST law provides certain restrictions on claiming ITC on the supply of free samples.
As per the GST law, a supplier cannot claim ITC on the supply of goods or services that are given away as free samples. This is because no GST is payable on the supply of free samples, and therefore, no ITC can be claimed on such supplies.
Conclusion
In conclusion, the supply of free samples may or may not attract GST depending on the conditions specified under the GST law. If the supply of free samples is made in the course of business, the recipient is not required to provide any consideration or payment, and the samples are supplied in quantities that are necessary for promoting the goods or services of the supplier, the supply of free samples is not subject to GST. However, if the supply of free samples does not meet these conditions, it may be treated as a taxable supply and may attract GST. It is important for businesses to understand the GST implications of providing free samples and to comply with the relevant provisions of the GST law.