free sample
surbhi (student) (343 Points)
06 January 2018
whether gst on free sample leviable or not??
4 Replies
Amrit kumar karn
(Semi Qualified CA)
(217 Points)
Replied 06 January 2018
TAXABILITY OF FREE SAMPLES
For the purpose of taxability of free samples we need to examine following aspect:
1. Taxable Person 2. Taxable Event 3. Taxable Rate 4. Taxable Value
1. Taxable Person: Section 2(107) provides that taxable person is a person who is registered or liable to be registered u/s 22 or 24 of the CGST Act.
For the purpose of taxability of free samples, person should be registered.
2. Taxable Event; GST shall be levied on the supplies of Goods & Services. It means Taxable Event will arise when Good & Services are supplied.
It means we need to understand supply. Supply covered under section 7 of the CGST Act that:
Supplies Made for Consideration
Supplies specified in Schedule I or Schedule II
>
Schedule-I provided that activities to be treated as supply even if made without consideration:
Point No. 1 permanent transfer or disposal of business assets where ITC has been availed on such asset. In our case ITC has not been availed therefore it does not fall into the criteria.
Point No. 2 covers supplies of Goods or Services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business without consideration.
Hence Free Samples to unrelated persons are not covered under definition of supply. Criteria of taxable supply are not fulfilled in case of free samples. If supply has not been done, Taxable event will not arise.
3. Taxable Rate: Rate of Tax will be similar if the same product is sold as taxable product.
4. Taxable Value: Valuation Rules provides the mechanism to calculate taxable value if the consideration is not wholly in money. Hence taxable value is out of the following:-
Open Market Value
Sum Total of consideration in money.
Value of goods or services or both of like kind and quality
Value as per rule 4 or 5 of valuation rules.
Thus, Free Samples are not liable to GST as the same are not form a supply.
For the purpose of taxability of free samples we need to examine following aspect:
1. Taxable Person 2. Taxable Event 3. Taxable Rate 4. Taxable Value
1. Taxable Person: Section 2(107) provides that taxable person is a person who is registered or liable to be registered u/s 22 or 24 of the CGST Act.
For the purpose of taxability of free samples, person should be registered.
2. Taxable Event; GST shall be levied on the supplies of Goods & Services. It means Taxable Event will arise when Good & Services are supplied.
It means we need to understand supply. Supply covered under section 7 of the CGST Act that:
Supplies Made for Consideration
Supplies specified in Schedule I or Schedule II
>
Schedule-I provided that activities to be treated as supply even if made without consideration:
Point No. 1 permanent transfer or disposal of business assets where ITC has been availed on such asset. In our case ITC has not been availed therefore it does not fall into the criteria.
Point No. 2 covers supplies of Goods or Services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business without consideration.
Hence Free Samples to unrelated persons are not covered under definition of supply. Criteria of taxable supply are not fulfilled in case of free samples. If supply has not been done, Taxable event will not arise.
3. Taxable Rate: Rate of Tax will be similar if the same product is sold as taxable product.
4. Taxable Value: Valuation Rules provides the mechanism to calculate taxable value if the consideration is not wholly in money. Hence taxable value is out of the following:-
Open Market Value
Sum Total of consideration in money.
Value of goods or services or both of like kind and quality
Value as per rule 4 or 5 of valuation rules.
Thus, Free Samples are not liable to GST as the same are not form a supply.
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