Ikramuddin Saifi (Senior Accountant) (158 Points)
06 August 2024Dear Sir,
We are Manufacturer of Cosmetic & Ayurvedic/ Unani Medicine. we are launching a scheme of "Buy one Get one" (other Product) (As- Buy 1 Badam Prash(12% GST) & Get one Soap (18%) free.
Now i want to know billing Procedure, How to bill & how to apply GST?
Asha Kanta Sharma
(Manager - Finance & Accounts)
(36355 Points)
Replied 07 August 2024
For a "Buy One Get One Free" scheme, where you are offering a free product along with a purchased product, you need to handle billing and GST as follows:
### **1. Billing Procedure**
1. **Identify the Products:**
- **Purchased Product:** Badam Prash (12% GST)
- **Free Product:** Soap (18% GST)
2. **Determine the Price and GST of Purchased Product:**
- **Price of Badam Prash:** [e.g., Rs. 100]
- **GST on Badam Prash:** 12% of Rs. 100 = Rs. 12
- **Total Price:** Rs. 100 + Rs. 12 = Rs. 112
3. **Billing for the Free Product:**
- **Free Product (Soap):** Since the soap is being given for free, it should not be separately billed to the customer. The cost of the soap is effectively absorbed by the manufacturer as part of the promotional scheme.
4. **Create a Combined Invoice:**
- **Invoice for the Purchased Product Only:** Bill the customer for the Badam Prash only. The invoice should show the price of the Badam Prash, the applicable GST, and the total amount payable. The soap should be mentioned as a promotional item or free gift, but not billed separately.
### **2. GST Application**
1. **GST on Purchased Product:**
- **Badam Prash:** Apply GST of 12% on the sale price of the Badam Prash.
2. **GST on Free Product:**
- **Soap:** Since the soap is not being sold, you are not required to collect GST on it from the customer. However, you must account for the GST in terms of input tax credits if the soap was purchased by you and is used as part of a promotional scheme.
### **3. Documentation and Compliance**
1. **Invoice Details:**
- **Invoice should clearly state:** "Buy One Get One Free" scheme.
- **Mention the free product as:** "Free Gift" or "Promotional Item" on the invoice.
2. **Record Keeping:**
- Maintain records of both the purchased and free products for internal accounting and GST compliance.
- Ensure to keep track of the cost of the free product for internal analysis and future reference.
3. **Input Tax Credit (ITC):**
- If you have purchased the soap from another supplier, you may have claimed ITC on it. Ensure that the ITC claimed is accurately reflected in your GST returns.
- Since the soap is not billed to the customer, ensure compliance with GST rules regarding the treatment of free goods and promotional offers.
### **Sample Invoice Layout:**
```
----------------------------------------------------------------
[Company Name]
[Company Address]
[GSTIN]
Invoice No: [Invoice Number]
Date: [Date]
Customer Name: [Customer Name]
Customer GSTIN: [Customer GSTIN, if applicable]
Item Descripttion Quantity Rate GST (%) Total (Rs.)
------------------------------------------------------------------------------------------------
1. Badam Prash 1 unit 100.00 12% 112.00
(Product of [Brand Name])
2. Soap (Free Gift) 1 unit 0.00 0% 0.00
(Product of [Brand Name])
Subtotal: 100.00
GST @ 12%: 12.00
Total Amount Payable: 112.00
----------------------------------------------------------------
```
**Note:** Always consult with a tax professional or GST consultant to ensure compliance with current GST regulations and practices, as tax laws and interpretations can change.
Ikramuddin Saifi
(Senior Accountant)
(158 Points)
Replied 07 August 2024
Very Good Explanation, Thank you so much
C.A. Sandeep Wawhal
(CA, PGDFM, BCom)
(1831 Points)
Replied 16 August 2024
Taxability of such supply will be dependent upon as to whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of section 8 of the said Act.
If it is composit supply then applicable tax rate will be the rate of goods which form substantial part of overall products.
If it is mixed supply, then applicable tax rate will be the rate of the goods which bears the higher rate of tax.
Refer Circular No. 92/11/2019-GST
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