free products

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how will give free products to traders , many of them telling it will applicable for tax , is it true or any documents
Replies (5)
Free supplies will be taxable under GST, if you supply them with an intention of business or furtherance of business.

That means, if the receiver of goods used them for business purposes, then it is taxable.

I beg to differ here, As per my interpretation GST will not be applicable on free supplies, Have a look at the following provision

The charging section, Section 9 of the CGST Act imposes a tax on supply. Supply has been defined in Section 7 of the CGST Act as 'all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business'. A supply is a supply within the meaning of section 7 of the CGST Act only when 'it is made for a consideration'. If some activity is being done, without a consideration, it is not a supply within the meaning of section 7 of the CGST Act, and hence no tax is attracted under section 9 of the CGST Act. Thus, no GST is payable on free supplies of goods or services or both.
 

As per para 2 of schedule I( ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION ) of CGST act supply includes

2.Supply of goods or services or both between related persons or between distinct
persons as specified in section 25, when made in the course or furtherance of business

even made without consideration

Agree with you , however do clarify how a trader is related to assessee or is a Distinct person as per Section 25, as this deemed supply provision is applicable on only them

no gst will apply in case supply of goods to unrelated parties without consideration, however proportionate input tax credit needs to be reverse.


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