New Delhi: In a price-sensitive market such as India, ‘Buy one get one’ schemes rule the roost as the most popular deals among consumers. However, all this could change and the schemes could soon lose their charm among buyers as the Goods and Services Tax (GST) is implemented.
According to reports, the government could impose GST on free articles, which are given away with select purchases.
According to the GST norms, buyers will also have to pay tax on the article that comes free. This was confirmed by some tax experts when the government unveiled the law for stakeholder comments.
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As per the norms, supplies specified in Schedule I, made without a consideration, are also liable to GST.
This additional tax burden on what are supposed to be freebies will definitely impact sales. Pratik Jain, national indirect tax leader at PwC in an ET report said, "Any form of direct or indirect GST on free supplies could have a significant impact on the sales & marketing spend of companies, specifically those dealing in consumer products."
Also the new GST law will mark significant deviation from value-added tax (VAT) principles.
Some tax experts said that the model law covers the supply of goods and/or services by a taxable person to another taxable or non-taxable person in the course or furtherance of business.
Bipin Sapra, partner at EY said in the report that the draft law proposes turnaround of GST credit attributable to non-taxable, but it does not say if free goods and supplies would be covered. He said, “While the GST law clearly lays down that supplies for business promotion without a consideration would be a supply, yet it fails to provide a clarity whether it would be treated as an exempt supply for reversal of credits."
