It appears that GST has come as a death knell for any sort of freebies. The popular promotional scheme of ‘buy one get one free’ could become a thing of past due to goods and services tax. As per new GST rules, companies are supposed to pay additional tax on any product given away as ‘free’.
As per the report published in Economic Times: “As per the GST Act, every time something is sold free of cost, its ‘transactional value’ must be found out and GST paid on it,” said ClearTax chief executive Archit Gupta. “Which means to prevent confusion around levying and depositing GST on free products and uncertainty around whether such GST can be availed as input credit, companies may prefer to provide pre-defined discounts and price reductions.”
This disruptive rule has forced the companies to move away from giving free products and instead, offer upfront discounts to consumers. The most prominent names which have stopped offering the offer of buy one get one free is our beloved Pizza chains including Pizza Hut and Dominos.