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GST Circular on Sales promotion scheme

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

Eligible
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

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