Marketing or Sales promotions is the promotion of a company’s products or services in order to raise demand for them. Every business utilizes their own methods to increase sales, the most prevalent of which is the “buy one, get one free” sale. In addition, a sales promotional offer might come with a free trial or special pricing for purchasing several items. This article discusses whether GST is applicable for sales or marketing promotions in India.
GST Applicability on Marketing and Promotional Sales
In the context of GST, the term “supply” has an all-encompassing meaning. Buying, selling, leasing, renting, disposing, exchanging, and bartering are all part of this. As a general rule, every exchange of goods or services for earnings is considered a supply under GST. When a company invests in marketing, its goal is to increase its sales. Marketing and advertising to potential customers is a crucial part of every company’s operations. Boosting an organization’s sales by the distribution of promotional products is a supply of commodities, making GST taxable on such supply.
Guidelines for calculating sales and marketing GST taxes
GST is charged on the value of the transaction. The price paid for the supply of products or services is known as the transaction value.
Items used for advertising or free samples are provided at no cost. However, GST must be paid based on the price at which the items could have been sold in the open market.
Input tax credit eligibility for the sales promotions in India
Input tax credit can be claimed by the business providing the marketing services. However, It is standard practice for businesses to provide branded promotional items—calendars, pens, handbags, etc.—as part of their marketing campaigns. The provision of such advertising materials is regarded as supplied by the Advance Ruling Authority. Since promotional products are not assets and their entries go straight to P&L, Schedule 1 does not apply to them.
As a result, the distribution of freebies is not subject to taxation. Therefore, GST is charged on the sale of such products, but input tax credits cannot be claimed.
Frequently, a provider may offer their customers a discount if they make a larger purchase. Such deals typically depend on the customer’s ability to make a large single purchase. Furthermore, these offers are similar to a contract that the client and supplier engage into at the time of supply. In addition, the discounts associated with these deals are not accurately reflected on the invoice. Consequently, the notification specifies that, provided the criteria of Sub-Section 3(b) of Section15 of the CGST Act are met, such offer shall not be included in the supply value. Nonetheless, a valid Input Tax Credit can be claimed for such purchases.
To comply with the requirements of section 34 of the CGST Act, many vendors offer discounts via credit notes after a transaction has already been made. Due to the lack of a pre-supply time arrangement, these reductions do not comply with the requirements of Section15(Subsection)3(b) of the CGST Act. However, the notification makes it clear that discounts issued in the form of credit notes are not included in the value of the supply for purposes of section 34 of the CGST Act. But Input Tax Credit can be claimed for these supplies.
The extent to which your brand is recognised and well-received by its intended audience is directly proportional to the effort put into its promotion. The GST is applicable for sales promotions in India, thus it’s important that the campaign be planned so that the message is communicated across as many channels as possible. The new strategy’s confidence-building methods will expand your audience. Therefore, it’s also best to consult a GST Expert or a CA to know more about the applicability of GST for sales promotion in India and how you can use it for the benefit of your business.
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