The popular ‘buy one get one free’ deals stand to lose some of their charm as the proposed goods and services tax (GST) may apply to free articles given away with those purchased.
As per Section 3 of the model GST law that the government has unveiled for stakeholder comments, supplies specified in Schedule I, made without a consideration, are also liable to GST.
This means that the buyer will have to pay GST on the article that comes free, said tax experts, confirming that the provision will impact the popular sales.
They called for clarity on the issue as the wider implication is that even free samples given by way of business promotion could attract GST.
“Any form of direct or indirect GST on free supplies could have a significant impact on the sales & marketing spend of companies, specifically those dealing in consumer products,” said Pratik Jain, national indirect tax leader at PwC.
Prashant Raizada, partner – indirect tax at BDO India, said, “The model GST Law does not provide any specific guidance on taxability of free samples issued by an entity to a prospective customer.”
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