charging gst on free sample

Free samples under GST

In the pharmaceutical industry, companies often provide free samples of medications and drugs to doctors, medical practitioners, government, and the public.

In the FMCG industry, promotional schemes like Buy 1 Get 1 Free are also prevalent.

Input tax credit not allowed on free samples

According to section 17(5) of the CGST Act, an input tax credit will not be available for goods given as gifts or free samples. Thus, if the taxpayer avails the input tax credit on account of a purchase of goods, and later gives these goods as free samples, the input tax credit will be reversed.

Value of free supplies

If goods are supplied free of cost, the value of the goods will be equal to the value of other goods that are of similar kind and quality. Similar goods are goods that are supplied under similar circumstances that, in respect of their characteristics, quality, quantity, functional components, materials, and reputation, are the same as, or closely or substantially resemble, each other.