GST on buy one get one free offer

Circular No. 92/11/2019- GST dated 7^th March 2019 clarify GST applicability on GST on buy one get one free offer.

Interpretation: As per sub-clause (a) of sub-section (1) of section 7 of the CGST Act, the goods or services which are supplied free of cost (without any consideration) shall not be treated as supply under GST (except in case of activities mentioned in Schedule I of the said Act).

At first glance, it might seem that offers such as "Buy One, Get One Free" involve giving away one item at no cost, without any exchange. However, in reality, it doesn't constitute a single supply of free goods. Instead, it involves two or more separate supplies bundled together under a single price. This arrangement can be best described as providing two goods for the price of one.

Taxability: The tax treatment of this supply depends on whether it qualifies as a composite supply or a mixed supply. The applicable tax rate will be determined in accordance with the provisions outlined in section 8 (Tax liability on composite and mixed supplies) of the CGST Act.

Availability of ITC: It is also clarified that ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to supply of goods or services or both as part of such offers.

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