12 Sep 2018Posted By: Mudit Handa

What is the Provision of Free Supply under GST?

The provisions under GST authority have been meticulously framed and have been modified periodically as to make them more consumer-centric. The GST council has hitherto regularly reworked various provisions under the Goods & Service Tax regime as regards GST registration and GST return filing procedure.


In a bid to make the GST regime much more consumer-friendly and opportune for an average taxpayer, the GST council had proposed modifications in the GST rules with respect to the applicability of GST on the free supply of goods in the FMCG retail sector. The council had proposed to remove the GST liability on free supplies. However, the decision in this regard will be taken in the 30th GST meeting that is scheduled to be held on 30th September 2018.


#1. Why is it important to know about GST provisions on free supplies?

As we all know that the festive season has approached once again! The retail outlets across India are flocked with the entire range of gift hampers consisting of various gift items clubbed together.


  • For instance, sweets can be clubbed with religious idols, or toiletries can be combined with clothes & accessories and the like.
  • Now, an average consumer might get perplexed about the applicability of GST on the entire gift hamper. As a matter of fact, a large number of naive customers complain about unfair levying of GST on gift hampers.


So, it is very imperative to know how the free supplies are treated under the GST Law.


#2. How are the free supplies are treated under the GST Act?

Broadly, the ‘free supplies’ refers to those goods that are supplied without a consideration. The concept of free supply of goods is explained u/s 17(5) of the CGST Act-2017. As per the provision, the input credit can't be availed on the goods offered as a free supply. This is likely to be reversed in the forthcoming 30th GST meet. The CGST Act classifies the free supplies under 2 categories-

  • Mixed supply
  • Composite supply


#3. What is meant by ‘Mixed supply’ under the GST law?

The concept of “mixed supply” is given u/s 2(74) of CGST Act-2017. A mixed supply refers to the supply of 2 or more individual of goods/services or their combination for a single price by any trader who has the GST registration. Such goods/services can be sold individually also.

As of now, the input credit cannot be availed on the mixed supplies.


#4. How can the concept of ‘Mixed supply’ be practically understood?

The concept of ‘Mixed supply’ can be Illustrated with the help of a case study.

If a Diwali gift hamper comprising of sweets, chocolates, cakes, dry fruits, cold drinks etc. is supplied for one price, it is a mixed supply. All these items can also be supplied separately. So, they not dependent on each other.


#5. What is meant by ‘Composite supply’ under the GST law?

The concept of “composite supply” is given u/s 2(30) of CGST Act-2017. The term ‘Composite supply’ refers to a supply of 2 or more taxable goods/services that are naturally bundled in the ordinary course of business, and one of them is a principal supply.


#6. How can the concept of ‘Composite supply’ be practically understood?

The concept of ‘Composite supply’ can be Illustrated with the help of a case given below-

If a television is packed and delivered along with insurance, then the supply of TV, Carton, transportation service and insurance, if clubbed together, is a composite supply. Here, the television will be treated as a principal supply.


#7. How is GST charged on the Mixed supply?

As per the GST law, GST on a mixed supply is the tax rate of that item which has the highest GST rate.

In the above case of Diwali gift hamper comprising of sweets, chocolates, cakes, dry fruits, cold drinks etc. we see that GST rate of cold drinks is highest, i.e. 28%. Thus, GST@28% will be charged on the hamper.


#8.How is GST charged on the ‘Composite supply?

In case of Composite supply, GST will be levied on the principal supply.


With that, you will be truly conversant with the applicability of GST on free supplies.


If you need any guidance as regards GST registration in India or GST return filing process, feel free to contact us at 8881-069-069.


Posted By Krishna Murthy Belagumba G
Posted Date 2018-09-16 13:28:56

Good information

Posted By Mudit Handa
Posted Date 2018-09-17 10:45:37

Thank you, Sir! Keep up with the latest updates on business & taxation.

Give a Reply

Fill up the form

E-startupIndia Mobile App


Download our free Android App and get realtime update on your order status.
Easily connect with our professionals handling your order over chat & mobile.
Never miss business compliances due date with advance notifications.

Get E-startupIndia in your mobile

Why Choose Us

e-startupindia member of GOOGLE

Serving business owners with an Average 4.8+ Google Rating.

e-startupindia certified #AxixBank

Trusted by Axis bank to cater its clients all licensing & compliance needs.

e-startupindia NG Alliance Partner

Providing lending solutions for business needs with NeoGrowth.

e-startupindia Google Partner

Open Neo bank account worldwide & provides cross-border remittance solutions.

e-startupindia member of CII

E-startupindia is a Proudly Member of Confederation of Indian Industry.The CII is a premier business association in India which works to create an environment.

e-startupindia certified #Etstartupindia

E-Startup India is duly certified under GOI's Startup India scheme and is renowned for our tech-driven solutions for business & legal services requirements for MSMEs.

e-startupindia Google Partner

E-Startup India is a Google Partner, which implies we are rigorously involved in assisting SME businesses to market their presence in the digital world.

Popular Services

Private Limited Company | Public Limited Company | One Person Company | Limited Liability Partnership | Partnership Firm | Sole Proprietorship Firm | Section 8 Company Registration | USA Company Registration | UK Company Registration | UAE Company Registration | Singapore Company Registration | Company Registration Hong Kong | Import Export Code | IEC Modification | AD Code Registration | Spice Board Registration | US FDA Certification | ISO 9001 2015 | ISO 14001 EMS | ISO 22000 FSMS | ISO 27001 ISMS | ISO 50001 Energy Management | ISO 45001 | ISO Surveillance | ISO Certification | MSME Registration | FSSAI Registration | Shop Establishment Registration | Barcode Registration | Coffee Board Registration | Startup India Certificate | ZED Certification | Trademark | Trademark Objection Reply | Trademark Opposition | Trademark Hearing | Trademark Formality Check Fail | Website Development | Patent | Copyright | Design Registration | Business Name Suggestion | Logo Designing | Trademark Assignment Service | GST Registration | GST Modification | GST Cancellation | GST Return Filing | GST Invoice Software | UIN Registration | Income Tax Return | Income Tax Notice | Income Tax Refund | Income Tax Assessment | TDS Return Filing | Form 15CA / CB | Professional Tax Registration | 12A and 80G Registration | FCRA Registration | CSR Registration | Project Report | Pitch Deck | Seed Fund Startup India | Accounting for Ecommerce | Virtual cfo services in india | Bookkeeping & Accounting | Private limited Company Annual Compliance | Form INC-22A | Form 15CA / CB | Company Strike Off | Commencement of Business | Fssai annual return | Online CA Consultancy | Income Tax Return Filling | LLP Annual Compliances | Form DIR-3 KYC | Virtual Office for Company Registration |


  • e-startupindia South Asia's Leading Multimedia News Agency
  • Business Standard
  • e-startupindia Outlook
  • e-startupindia Htmedia
  • e-startupindia Yahoo News
  • e-startupindia New Delhi Times
  • e-startupindia India.com
  • e-startupindia IBTN9