Answer By law4u team
GST on Discounts, Offers, and Free Goods in India Goods and Services Tax (GST) applies differently to discounts, promotional offers, and free goods, depending on how they are structured. 1. GST on Discounts Discounts are classified as pre-supply discounts or post-supply discounts under Section 15 of the CGST Act, 2017. Pre-supply Discounts (Before Sale) If a discount is mentioned on the invoice, GST is applied only on the reduced price. Example: A product priced at ₹1,000 with a 10% discount (₹100) will be taxed on ₹900. Post-supply Discounts (After Sale) If a discount is offered after sale under a pre-agreed contract, GST can be adjusted via a credit note. The supplier must ensure that the recipient has reversed the ITC (Input Tax Credit) on the discount. Trade Discounts & Volume Discounts If given under an agreement and ITC is reversed, GST does not apply. If offered as an incentive after sale, it may be treated as a separate transaction, attracting GST. 2. GST on Promotional Offers & Buy-One-Get-One-Free Buy-One-Get-One-Free (BOGO) GST is not free on such offers. The tax applies to the total value of the transaction. If a shop sells 1 soap free with 1 soap (₹50 each), GST is calculated on ₹100. Combo Offers (Bundled Goods) If products are naturally bundled (e.g., a laptop with a free mouse), GST applies at the rate of the principal product. If they are separate items (e.g., a phone with a free cover), GST applies to each product individually. 3. GST on Free Samples & Gifts Free samples (e.g., medicines, cosmetics) are considered non-taxable supplies, but ITC on their purchase cannot be claimed. Corporate gifts are taxable under Schedule I of the CGST Act, and ITC must be reversed. Conclusion Discounts reduce GST if applied before sale and mentioned on the invoice. BOGO and promotional offers attract GST on the total value. Free goods are taxable unless given as samples, but ITC on them is restricted.
