Glad to share a recent circular issued by CBIC providing clarifications on treatment of sales promotion schemes under GST vide Circular No.92/11/2019-GST dated 7 March 2019. NASSCOM had participated in the industry consultation called for by CBIC in the month of November and had shared a detailed submission on sales promotion schemes. We are glad that most of our asks are addressed vide this circular.
A summary of the taxability, valuation and credit eligibility as clarified by the circular is provided below and a copy of the circular is attached.
|Sl. No||Particulars||Taxability||Input tax credit eligibility|
|1||Distribution of free samples and gifts||·Does not qualify as ‘supply’ in the absence of consideration unless activity covered under Schedule I of CGST Act (related party transaction)||Ineligible in terms of Section 17(5)(h) of the CGST Act – goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples|
|2||Buy one get one free offer||· To be treated as ‘supplying two goods for the price of one’
· Free item cannot be held as supplied free of cost without consideration
·Taxability to be determined based on nature of supply i.e., composite or mixed
|3||Discounts including ‘Buy more, save more’ offers||·Value of trade discounts, volume discounts and post-supply discounts established before or at the time of supply to be excluded from value of supply||Eligible|
|4||Secondary Discounts (i.e. re-valuation of price post supply)||·Commercial credit notes may be issued without GST adjustments as discounts not known at the time of supply cannot be excluded from the value of supply||No impact on credit availed in the hands of the supplier|