‘Buy 1, get 1 free’ deals under GST

New Delhi, June 19

Free samples and gifts offered with purchases as well as popular ‘buy-one-get-one-free’ deals may attract the proposed Goods and Services Tax (GST) levy which the government plans to roll out from April next year.

The model GST law, unveiled by government last week for stakeholder comments, says any supply sans any consideration will attract tax. This would cover free gifts and samples as well as buy-one-get-one-free deals, tax experts said. Section 3 of model law defines supply of goods and services to include ones “made or agreed to be made without a consideration”.

Under Schedule-1 for ‘Matters to be Treated as Supply Without Consideration’, the law goes on to define them as “Supply of goods and/or services by a taxable person to another taxable or non-taxable person”. Buyers will have to pay GST on articles they receive free. “GST will be entirely based on the concept of ‘supply’, which now includes even goods and/or services supplied without consideration by a taxable person in the course of or furtherance of business,” said Rohit Jain, Partner, Economic Laws Practice.

KPMG India National Head (Indirect Tax) Sachin Menon said, “This will impact the sales and marketing cost of companies which follow the system of free samples or free supply strategy such as ‘buy one get one free’.   Presently, for a free sample of goods, excise duty is payable but VAT/CST is not payable. However, proportionate input tax credit under VAT is reversible in some states. The net impact for businesses will therefore be the difference between the existing Excise and VAT cost, and the GST which will become payable.” — PTI