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GST and You: How are free samples treated under the new tax regime?
June, 13th 2017

While the GST (goods and services tax) is exempt for those with annual turnover below Rs 20 lakh, what is included/ excluded when calculating the total turnover?

Section 22 of the CGST Act, 2017, provides provisions with regard to a person who is required to obtain registration under GST. According to this, every supplier is liable to be registered in the state or Union Territory, other than special category states, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds Rs 20 lakh. Provided that where such person makes taxable supplies of goods or services or both from any of the special category state, he shall be liable to be registered if his aggregate turnover in a financial year exceeds Rs 10 lakh. Thus, the requirement for obtaining registration shall only arise if a person makes taxable supplies from that state. Further, the term ‘aggregate turnover’ means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on a reverse charge basis), exempt supplies, exports of goods or services or both and inter-state supplies of persons having the same Permanent Account Number (PAN), to be computed on all India basis but excludes central tax, state tax, Union Territory tax, integrated tax and cess;

To summarise, the aggregate turnover of a person would include the following:

Taxable supplies (supply of goods or services which is chargeable to tax under this Act)
Exempt supplies (supply of goods or services which attracts no tax or are wholly-exempt from tax and includes non-taxable supply)
Export of goods and/or services
Stock transfers between different states

How are free samples treated under GST?
According to credit provisions in the GST Act, input tax credit shall not be allowed for goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Accordingly, input tax credit is required to be reversed pertaining to goods which have been disposed of by way of free samples.

I work for an insurance company. Under GST, if my agent does not file income tax returns, even I will not get credit for it. Since I have a lot of small agents, what is the way out?
Services received by an insurance company from an insurance agent have been specifically prescribed in the list of services taxable under the reverse charge mechanism in GST.

In the current case, the insurance company (service recipient) shall be required to pay GST under reverse charge mechanism for services provided by an insurance agent (service recipient). Further, the insurance company should also be eligible to avail credit of tax paid under reverse charge mechanism, irrespective of the fact whether the service provider is registered under GST or not. In this regard, it is noteworthy that there should not be any requirement for the insurance agent to obtain registration and file returns under GST.

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