The ‘Buy One, Get One’ offer that lured you to buy most of the products may no longer attract you as the Indian government is thinking of levying Good and Services Tax (GST) on the free product.Yes, this means your free product will also be taxed.
Under the Section 3 of the proposed GST bill, the government has stated that the supplies specified in Schedule I, made without a consideration, are also liable to GST.
Meanwhile, tax experts have called for some clarity on the same.
"Any form of direct or indirect GST on free supplies could have a significant impact on the sales & marketing spend of companies, specifically those dealing in consumer products," Pratik Jain, national indirect tax leader at PwC, told ET.
Tax experts say the Entry 5 of Schedule I states "supply of goods and/or services by a taxable person to another taxable or non-taxable person in the course or furtherance of business".
"While the GST law clearly lays down that supplies for business promotion without a consideration would be a supply, yet it fails to provide a clarity whether it would be treated as an exempt supply for reversal of credits," Bipin Sapra, partner at EY, told ET.
The Indian government has been doing everything to get the GST bill passed, which will bring state and central taxes with a single GST. However, Congress has opposed the move.