supply

This query is : Resolved

Share Report Follow Query Ask a Query

MD zakarullah khan

MD zakarullah khan (Querist)
Follow

23 January 2018 Is Goods given as free sample is a supply. If yes /no. Then why?

CA Suresh Jain

CA Suresh Jain (Expert)
Follow

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).

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

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**.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Summarize this with AI

ChatGPT Perplexity Claude Google AI Grok

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

CA. MOHIT SHARMA

balamurugan

madhu sudan

Deepak Nayak

Rubal Singhal

Subscribe Now

supply

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

CA Final

GST CONSULTANT

Accountant

Manager- Finance and Compliance

Article Assistant

GST CONSULTANCY