All of us know that the festive season has now begun and we all are so excited about it. After all, this is the only time of the year when we all will be able to get time to set aside our entire professional obligations and meet all our loved ones. Moreover, it is this festive season when all the shops and emporia are flocked with a wide range of gifting items. And from this gifting range, we have to pick out our favorite choice and make a wise bargain for a wise buy.
Hence, we must clearly know how the taxes are applicable on the gifting items. We know that we are living in the GST regime. Thus, we must be familiar with the ground rules of GST on gift items.
1. How does GST apply on gift items?
The measures of the CGST act have been exactingly encircled and have been changed from time to time as to make them more consumers driven. The GST department has freshly repeatedly improvised special provisions under the Goods and Service Tax law in respect to GST registration as well as GST return filing procedure.
In an offer to make the GST organization altogether more shopper friendly and ideal for a typical taxpayer, the GST committee had proposed changes the GST policy with respect to appropriateness of GST on free supply of products in the FMCG retail segment. The committee had proposed to expel the GST tax on free supplies. As a result, the decision in such approach has been taken at the 30th GST council meeting that was held at New Delhi on 30th of September 2018.
2. Why is it so essential to know about the GST policy on free supplies?
As we as a whole realize that the happy festive season is just round the clock! The retail outlets crosswise over India are rushed with the whole plethora of gift hampers. These gift hampers comprise of diversified gift things clubbed together. These are called free supplies, on which GST rules apply separately.
- For example, desserts can be clubbed with religious statues, or cosmetics can be joined with articles of apparel and the like.
- Presently, a normal bargain hunter may get bewildered on the rightness of GST on the whole gift hamper. Truly, most of innocent clients grumble about too excessive a charge of GST on gift hampers.
- Along these lines, it is especially fundamental to know how the free supplies are dealt with under the GST act.
2. How the free supplies actually come under the GST law?
Comprehensively, the ‘free supplies’ is a term that refers to all those products that are sold without a charge. The idea of free supply of products is clarified u/s 17(5) of the CGST Act-2017.
According to the arrangement, the input credit is constrained on the goods given away as a free supply. This is probably going to be turned around in the anticipated 30th GST meet. The CGST Act characterizes the free supplies under 2 classifications
- Mixed supply
- Composite supply
3. What is implied by ‘Mixed supply’ as per the GST law?
- The idea of “mixed supply” is given in section 2(74) of CGST Act-2017. A mixed supply alludes to supply of at least 2 individual of merchandise/administrations or their blend at a solitary cost by any broker who has GST registration. Such merchandise/administrations can be sold exclusively too.
- Starting at now, the input credit cannot be profited on the mixed supplies.
4. How to understand the idea of ‘Mixed supply’ applicable for all kind of supplies?
The idea of ‘Mixed supply’ can be well understood with the assistance of a contextual analysis.
- On the off chance that a Janmashtami gift hamper containing Indian sweets, chocolates, muffins, dry organic products, chilly beverages and the like is provided at one price. It is thus a mixed supply. Every one of these things can likewise be provided independently. In this way, they not conditional on each other.
5. What is implied by ‘Composite supply’ under the GST law?
The idea of “composite supply” is given u/s 2(30) of CGST Act-2017. The term ‘Composite supply’ relates to a supply of no less than 2 taxable items that are normally packaged and in standard course of business, and one of them is called a principal supply. A shopkeeper having GST registration can charge GST only on the principal good.
6. How to understand the idea of ‘Composite supply’ on basic goods?
The idea of ‘Composite supply’ can be well understood with the assistance of a case given here below:-
- On the off chance that a TV is packed and transported alongside protection, at that point the supply of TV, Carton, box transportation cost and protection, if clubbed together, can become a composite supply. Here, the TV will be taken as a principal supply in GST.
7. How is GST charged on the Mixed supply?
According to the GST act, GST on a mixed supply good is the GST rate of that thing which has the most expensive GST rate.
- In the above instance of Diwali gift hamper involving desserts, chocolates, cakes, dry natural products, chilly beverages and so on we see that GST rate of cool beverages is most noteworthy, i.e. 28%. Consequently, GST@28% will be charged on the hamper.
8.How is GST charged on the ‘Composite supply?
In the event of Composite supply, GST will be exacted on the principal supply.
With all that, you will now be genuinely familiar with the applicability of GST law on the free supplies.