The treatment of “Buy One, Get One Free” offers can initially appear as if one item is being supplied free of cost without any consideration. However, it is not an individual supply of free goods but a case of multiple individual supplies where a single price is being charged for the entire supply. Essentially, it is the supply of two goods for the price of one.
The taxability of such a supply will depend on whether it is a composite supply or a mixed supply. The rate of tax will be determined according to the provisions of section 8 of the Goods and Services Tax (GST) Act. If the supply is a composite supply, it will be taxed at the rate applicable to the principal supply. If it is a mixed supply, the rate of tax will be determined by the highest rate applicable to any of the goods or services in the mix.
It is important to note that input tax credit (ITC) will be available to the supplier for the inputs, input services, and capital goods used in relation to the supply of goods or services as part of such offers. In other words, the supplier will be able to claim ITC for the goods or services provided as part of the offer, even if they are supplied for free.
In summary, the “Buy One, Get One Free” offer is not a supply of free goods but rather a case of multiple individual supplies combined into a single price. The taxability of such a supply will depend on whether it is a composite supply or a mixed supply, and the rate of tax will be determined accordingly. However, ITC will be available to the supplier for the inputs, input services, and capital goods used in relation to the supply, regardless of whether the goods or services are provided for free.
Circular No. 92/11/2019-GST dated 7th March 2019