# Sales Promotion Schemes Under GST

## Free Samples and Gifts

Goods supplied free of cost, without consideration are NOT supply under GST.
Exception: If covered by Schedule I (e.g., gifts between related persons exceeding limits, or where ITC was availed), they ARE supply.
ITC implication: ITC on inputs used to make such free samples/gifts is blocked under Section 17(5).

## Buy One Get One (BOGO) Offers

BOGO is NOT a 'free supply'.
Economically: it is two supplies for a single consolidated price — not one free.
GST treatment depends on the nature of the supply:
If goods/services are naturally bundled → Composite supply (taxed at rate of principal supply).
If artificially bundled → Mixed supply (taxed at highest rate of any item).
ITC is available on inputs/input services used to procure these goods, since the supply is not 'free'.

Worked example

### Example 1

Free Sample – Pharma: A pharma company distributes free sample medicines to doctors. Since no consideration flows, it is NOT a supply, BUT input tax credit on those medicines must be reversed under Section 17(5)(h).

### Example 2

BOGO – Toothpaste: 'Buy 1 toothpaste at ₹100, get 1 free.' Treated as supply of two toothpastes for ₹100 (combined). If they are the same product → composite supply; tax applied on full ₹100. ITC remains available.

⚠️ Common exam mistakes

Treating BOGO items as free and reversing ITC — wrong, since BOGO is two-for-one priced supply, not a gift.
Forgetting to reverse ITC on inputs used for distributing free samples.
Treating samples covered by Schedule I (e.g., free to related persons in business) as non-supplies.

Reference: — Circular No. 92/11/2019-GST dated 07.03.2019

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

GST Treatment of Sales Promotion Schemes [Circular 92/11/2019]

Worked example

⚠️ Common exam mistakes