12 Mar 2019Posted By: Mudit Handa

Government Clarifies GST on Sales Promotion Schemes

Everyone knows that the festive season is around the corner. The festival of colors i.e. Holi is coming! No doubt, all the gift shops, and markets will be soon amassed with a huge range of gift hampers consisting of various sweets & other gift items.

  • One such occasion, one can find attractive gifting options such as Indian sweets clubbed with religious idols, or grocery items combined with snacks & savories and so on.
  • An ordinary consumer can be confused about how GST is applied on an entire gift hamper. Recently, many consumers inquire about how GST is levied on gift hampers.

The GST authority had proposed to remove the GST on free supplies, a few months ago. However, the decision was put on hold. Now, the GST department has framed new regulations regarding GST on various sales promotion schemes.


#1. Why has the GST council framed new rules for sales promotion schemes?

These days, it has been noticed that several promotional schemes are being run by the persons having GST registration to boost their sales.

  • The aim behind such schemes is to attract new customers.  
  • GST council has taken into account these promotional schemes and has examined them as regards GST applicability, valuation, and availability of Input Tax Credit.

Hence, the council has now devised some new rules for sales promotion schemes.

please refer to 


#2. Which type of promotional schemes are examined by the GST council?

Basically, the GST council has framed new policies on the following types of sales promotion schemes:

  1. Free samples & gifts
  2. Buy 1 get 1 free offers
  3. Buy more, save more discount offers
  4. Secondary Discounts


#3. What rules have been framed for Free samples & gifts?

The Central Board of Indirect Taxes and Customs (CBIC) has clarified that-

  • Samples distributed for free do not fall under the category of ‘supply’ under GST.
  • This, however, excludes those activities falling under the Schedule I of the CGST Act 2017. This also includes supplies made in the course or furtherance of business by a trader having GST registration.
  • The input tax credit shall not be allowed to the supplier having GST registration on the inputs, input services, and capital goods.


#4. What rules have been framed for Buy one get one free offers?

In this regard, CBIC has said that-

  • Such an offer can be treated as a supply of 2 goods for the price of one.
  • Applicability of GST shall be decided by whether the supply is a composite supply or mixed supply.

Know more about 

  • Here, ITC input tax credit shall be allowed to the supplier for the inputs, input services, and capital goods.


#5. What rules have been framed for Buy more, save more discount offers?

CBIC has clarified that-

  • There are some Discount offers such as ‘Buy more, save more’, ‘Volume Discount at Year-End’ or ‘Discounts at Periodic Interval’ and post-supply or volume discounts.
  • Such offers shall be excluded while determining the value of supply.
  • However, such supply should fulfill the conditions laid down u/s 15(3) of CGST Act 2017.
  • This also includes the input credit reversal by the recipient of the goods on the basis of a document issued by the supplier.


#6. What are Secondary Discounts?

Secondary Discounts are those discounts that are offered after the supply due to some reason. Such Discounts as discussed u/s 34(1) of CGST Act 2017 may be given if-

  • GST charged in the GST invoice exceeds the tax payable for such supply.
  • Goods supplied are found to be deficient.
  • There is a sales return.

In such cases, supplier having GST registration may issue to the recipient credit note(s) for the supplies made.


#7. What rules have been framed for Secondary Discounts?

In the case of secondary Discounts, CBIC has clarified that the value of the supply shall not include any such discount.

The input credit shall be reversed by the recipient.


If you need any guidance on GST registration, please feel free to contact our business advisor at 8881-069-069.

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