Clarification by CBIC in respect of GST on Free Samples, Disocunts, "Buy one Get one free" offer.

1. CBIC vide circular 92/11/2019 clarified following with respect to the various sales promotion schemes adopted by the businesses.

a. Free Samples: 

Since the definition of supply under section 7 makes it clear that consideration must be part of the transaction, free samples are not taxable under GST except specifically specified under Schedule 1). At the ITC used for such free samples shall not be available.

b. Buy one Get one Free:

In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one. 

So it may be considered as either Composite supply or Mixed supply depending on the case and taxed accordingly. ITC of all the product under such case shall be available fully.

c. Discounts including ‘Buy more, save more’ offers

It is clarified that discounts offered by the suppliers to customers (including staggered discount under Buy more, save more‟ scheme and post supply / volume discounts established before or at the time of supply) shall be excluded to determine the value of supply provided they satisfy the parameters laid down in sub-section (3) of section 15 of the said Act, including the reversal of ITC by the recipient of the supply as is attributable to the discount on the basis of document (s) issued by the supplier.  

It is further clarified that the supplier shall be entitled to avail the ITC for such inputs, input services and capital goods used in relation to the supply of goods or services or both on such discounts.

d. Secondary Discounts (Periodical Quantity Discount):

A commercial credit note can be issued in respect of such discount, such discount cannot be reduced from the value of supply. No Impact on ITC.

2. TCS is not part of Value of Supply

Further revising the circular no. 76/50/2018, a revised ciruclar (Corrigendum) has been issued which has clarified that TCS shall not be part of the value of supply.