Tax authorities had earlier sent notices to companies belonging to several sectors, enquiring about the freebies which also became taxable under the ambit of the GST
In what seems to be a huge relief for several sectors, the Goods and Services Tax (GST) on ‘buy one get one’ products, free samples and additional quantities of products may not be taxed anymore, reported The Economic Times. Several sectors like FMCG, pharma, textile, food and retail chains, who offer freebies along with their products as part of a marketing strategy will breathe a sigh of relief if tax collection on ‘extras’ is stopped.
The report goes on to suggest that tax authorities had earlier sent notices to companies belonging to the aforementioned sectors, enquiring about the freebies which also became taxable under the ambit of the GST.
Flipkart, Amazon gear up for fierce showdown this festive season. Details here
Besides, a select number of officials who are members of the GST Council have also upvoted the idea of doing away with GST on freebies. However, a final call will be taken to settle the issue by the council later in the year, according to a government official.
Earlier, the Law Review Committee had also said in its report – later submitted to the Council – that the total consideration towards such additional goods should be chargeable under GST, adding that the input tax should also not be denied in such cases.
It should be noted that the price paid by a consumer for purchased goods is considered while levying GST even if one item comes free with another. In such a scenario, both the items (the purchased one and the free one) would be applicable for input taxes against the final tax.
Taking the above point into consideration, the committee suggested that gifts and samples packs should not be denied input tax credit. Such promotional schemes are very popular among certain sectors but were thrown out of practice since the GST regime came into force last year.