Sales Promotional Offer Treatment under GST

Prakash Matre
Prakash Matre at March 21, 2023

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Overview of Sales Promotional Offer

To promote sales every taxpayer uses different techniques, the most common of them are buy one get one promotional offer. Moreover, sales promotional offer may also include a free sample or bundled offer. The main question arises in the mind of the taxpayer that How to treat sales promotion offer under GST? or is GST applicable on sales promotion.

So to sort out this Central Board of Indirect Taxes and Custom (CBIC) commissioner via vide notification (7th March 2019) has clarified all the sales promotion GST rate.

This article provides the insight into the following case scenarios regarding sales promotional offer treatment under GST in brief:

ITC Availability on Free Sample and Gifts Distributed

As per Sub-Section 1(a) of Section 7 of CGST Act, the term supply means any supply of goods or/and services such as sale, exchange, transfer, barter, rental, lease or disposal to be made or agreed for consideration for the furtherance of business.

So, as per Section 7 of the CGST Act, we can conclude that free sample and gifts distributed to prospective clients or customers are not considered as supply as there is no consideration involved.

Furthermore, as per Sub-Section 5(h) of section 17, the ITC on gifts or free sample is not permissible.  

However, it shall be noted that when the supply comes under Schedule 1 of CGST Act, ITC will be available.

Buy 1 Get 1 Free offers

Buy 1 Get 1 free plans are very conventional for FMCG Companies where one product is free on the purchase of another product. As we already know that goods sale without consideration is not treated as supply as per Section 7 of CGST Act.

Although, it may appear that the product sold as free is an independent supply. However, if it can be either mixed/composite supply with the principal product as per section 8 of CGST act. Therefore, Input Tax Credit on such goods is permissible.

Buy More, Save More Offers

Many a time to promote sales supplier provides the customer to buy more, save more offers. Such offers are mainly dependent upon the quantity or volumes of goods purchased by the customer. Moreover, these offers are like an agreement between customer and supplier, which they enter at the time of supply. Further, these offers are not duly recorded in the invoice as the actual amount of discount. So, as per the vide notification also states that such offer shall not form a part of supply value provided that conditions under Sub-Section 3(b) of Section15 of CGST Act are satisfied. Howsoever, Input Tax Credit on such goods is claimable.

Other Discounts

As per section 34 of CGST Act, many suppliers post sales provides a discount by issuing credit notes. As no agreement is made before the supply time, therefore, these discounts do not meet with the conditions specified as per Sub-Section 3(b) of Section15 of CGST Act. However, the notification has clearly specified that under section 34 of the CGST Act, such supply value will not include any discount provided through the issue of a credit note. However, Input Tax Credit on such goods is permissible

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