what is treatment of FOC sale in Pharma co.? eg. free medicine sale with ratio 10:02. Bill of 10 Qty & 2 Qty Free.
Need to Reverse ITC for Free goods?
Need to pay output tax liability on free goods?
or no need to pay tax & no need to reverse itc.
pls suggest.
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Free of Cost(FOC)supply in Pharma Co.
Replies (6)
Free of cost, samples is not qualify as supply under gst
but it's ur business promotion not gst on free of cost but such goods need to be reverse itc if it's taken on su h goods
but it's ur business promotion not gst on free of cost but such goods need to be reverse itc if it's taken on su h goods
The issue arises on 2 counts -
1. ITC reversal u/s 17(5)(h) - disposal or write off by way of gift or free sample; or
2. Outward supply - Section 7 r/w Schedule I clause 1 - Deemed supply - without consideration - when business asset is permanently transferred where ITC has been claimed.
In your example it is neither a gift or free sample. So Section 17(5) does not attract.
The goods given as FOC, is essence are covered in the cost of the 10 products being sold, therefore, if this is the case, no additional liability and no ITC reversal would apply.
When 2 goods being sold as FOC are different from the 10 goods, then concept of mixed/composite supply would get attracted.
You may refer Circular 92/0219-CGST. Where the values are high, and transactions are complex suggest to obtain an expert opinion in this regard as there are certain risks/ambiguities in such area.
You may reach me on my email akshay @ hiregange.com
Issue free samples are not considered under Gst.
Incase of Medicines distributed Free of Cost, ITC is Blocked under Section 17(5) of the CGST Act 2017.
Yes agree with CA Akshay Ji reply,
As you are supplying it as 10+2 , price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one hence Not required to reverse ITC .
As you are supplying it as 10+2 , price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one hence Not required to reverse ITC .
No need to reverse ITC
But pay tax on outward supply of items received under scheme
But pay tax on outward supply of items received under scheme
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