supply
This query is : Resolved
23 January 2018
Is Goods given as free sample is a supply. If yes /no. Then why?
23 January 2018
Strictly speaking the free samples are supply as per section 7 (1). Whether or not a supply, you need to reverse the ITC taken as provided under section 17 (5) (h).
26 July 2025
This is a **very relevant question** under **GST law**.
---
## ✅ **Are free samples considered “Supply” under GST?**
### 🔴 **No**, **free samples are *not* considered “Supply” under GST**.
---
## 📘 Why?
Let’s break it down with legal references.
### 📜 As per **Section 7(1)(a)** of the CGST Act, 2017:
> *Supply includes all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease, or disposal made for a **consideration** and in the course or furtherance of business.*
✅ **Free samples are given *without consideration*** → hence **not covered under supply** as per Section 7(1)(a).
---
## 📘 Rule 28 (Valuation Rules) and Schedule I:
### 📌 Exception — **Schedule I** of the CGST Act covers:
> Activities that are considered "supply" even if made **without consideration**, **but only between related persons** or in specific cases.
✅ **Free samples to unrelated customers** → **NOT supply**
❌ **Free samples to related parties** → **Treated as supply** (taxable)
---
## ✅ What is the practical impact?
* **No GST** needs to be paid on free samples to customers (if unrelated).
* But you must **reverse ITC** on the inputs/input services used for producing those free samples.
---
### 🔁 **Section 17(5)(h)** of the CGST Act:
> **Input tax credit (ITC) is not available** on **goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples**.
🚫 So, **you can't claim ITC** on goods used for free samples.
---
## ✅ Summary:
| Aspect | Treatment under GST |
| ---------------------------- | ----------------------------- |
| Free sample to customer | ❌ Not supply (no GST payable) |
| Free sample to related party | ✅ Supply (GST payable) |
| ITC on free sample | ❌ Blocked under Sec 17(5)(h) |
---
Let me know if you'd like a **sample note for accounting treatment** or **how to disclose this in GSTR-3B or GSTR-9**.
---
## ✅ **Are free samples considered “Supply” under GST?**
### 🔴 **No**, **free samples are *not* considered “Supply” under GST**.
---
## 📘 Why?
Let’s break it down with legal references.
### 📜 As per **Section 7(1)(a)** of the CGST Act, 2017:
> *Supply includes all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease, or disposal made for a **consideration** and in the course or furtherance of business.*
✅ **Free samples are given *without consideration*** → hence **not covered under supply** as per Section 7(1)(a).
---
## 📘 Rule 28 (Valuation Rules) and Schedule I:
### 📌 Exception — **Schedule I** of the CGST Act covers:
> Activities that are considered "supply" even if made **without consideration**, **but only between related persons** or in specific cases.
✅ **Free samples to unrelated customers** → **NOT supply**
❌ **Free samples to related parties** → **Treated as supply** (taxable)
---
## ✅ What is the practical impact?
* **No GST** needs to be paid on free samples to customers (if unrelated).
* But you must **reverse ITC** on the inputs/input services used for producing those free samples.
---
### 🔁 **Section 17(5)(h)** of the CGST Act:
> **Input tax credit (ITC) is not available** on **goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples**.
🚫 So, **you can't claim ITC** on goods used for free samples.
---
## ✅ Summary:
| Aspect | Treatment under GST |
| ---------------------------- | ----------------------------- |
| Free sample to customer | ❌ Not supply (no GST payable) |
| Free sample to related party | ✅ Supply (GST payable) |
| ITC on free sample | ❌ Blocked under Sec 17(5)(h) |
---
Let me know if you'd like a **sample note for accounting treatment** or **how to disclose this in GSTR-3B or GSTR-9**.
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