25 Aug 2018Posted By: Mudit Handa

GST Council likely to remove Tax liability from freebies

It can’t be overlooked that GST authorities have so far sought to revise the laws and provisions under the Goods & Service Tax so as to simplify the mechanisms of GST registration and GST return filing. No wonder, they have been able to make them more providential to the trade & commerce of India. The government is however keen on making the scenario totally infallible and convenient for the taxpayers as well as the authorities by frequent amendments in the GST provisions.

In a bid to make the GST regime much more consumer-friendly, the government has decided to alter the regulations of the GST law as regards levying of GST on the free supply of goods under FMCG category.

The GST council has decided to remove GST liability from the freebies in FMCG retail sector.


#1. Which kind of free supplies are to be exempted from GST?

The GST Council has recently briefed on its prospective decisions that will be executed in its forthcoming meeting. It has been revealed that the council is soon to exempt the free supply of goods from the GST levy. Such categories of goods serve as mainstream marketing strategies in the Fast Moving Consumer Goods (FMCG) retail sector, include:

  • Buy 1 Get 1 FREE! Items
  • Free samples
  • Additional (Extra) quantities of goods
  • Prizes for Free

#2. Why has the GST Council decided to remove GST liability from the freebies?

As a measure to provide further relief to the consumers on the purchase of the FMCGs, the Council has decided to remove GST liability.

  • Very importantly, the free supplies had become subject to GST levy post rollout of GST last year. Undoubtedly, this has put the burden on the pocket of an average consumer.
  • Moreover, the traders covered under GST registration made a point that freebies charged with GST no longer free for consumers, and this ceases the manufacturers to run such schemes.

Thus, the GST authorities have now decided to remove the GST tax from the freebies.


#3. How will the decision to remove the GST tax from the freebies be implemented?


The Law Review Committee under GST has recently submitted a report to the GST Council. It has stated that the consideration paid on the freebie supplies must be charged with GST but the input credit must not be denied on such free goods. This implies that the price paid by the consumer must include GST on freebies as well, but such goods must not be denied ITC.


#4. What does this mean?


This clearly implies that the input tax paid on both items in a scheme will be set off against final GST. the trader will need to show the input tax paid on both items while their GST return filing procedure.


#5. Why is the input credit to be availed on freebies?

According to the GST experts, the freebies must not be denied the input tax credit. As long as the distribution of free goods is from a commercial standpoint, it must be noted that price of such goods is already factored in the MRP of that item on which GST has been paid already.

Hence, input credit must not be denied on the freebies.


If you need any sort of assistance regarding GST registration process in India or GST return filing process, feel free to contact us at 8881-069-069.




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.


  • 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