Samples to Customers

[JOHN SHANNEL]

Hello experts,

My industry is a fashion industry. We make products and send one sample to our distributors for them to see the product and give us orders.

The sample sent to distributors are considered as supply? Do i have to raise GST invoice. Please help to clarify.

[Sadanand Bulbule]

Dear querist

Please refer the comprehensive clarification issued under CBIC Circular No. 92/11/2019-GST dated 07/03/2019 for more details.

[DR.MARIAPPAN GOVINDARAJAN]

It is not a supply.

[KASTURI SETHI]

It being not a supply, the movement of sample should be done on a delivery challan under Rule 55 of CGST Rules, 2017 and NOT on  a  tax  invoice.

[JOHN SHANNEL]

Dear experts, Thanks for taking time and clarifying.

[Shilpi Jain]

One aspect you would have to check is whether ITC reversal would be required as it is free sample. Or whether you can prove this to be a sample given whose cost is included in the agreed price for the orders? If yes, then ITC reversal would not be required.

[KALLESHAMURTHY MURTHY K.N.]

Dear Sir, 

I agree with Shilpi Jain Madam's point in Sl. No. 5. about the reversal of ITC.  Where a sample is supplied as part of a business promotion, no tax invoice is required to be issued. But ITC utilised on such products has to be restricted under Rule 42.

[JOHN SHANNEL]

Dear Experts, Please clarify what is the type of document have to be used in case of inter statement movement of samples?

[Sadanand Bulbule]

Dear Sir

In the case of transportation of free sample garments,, being free from tax, delivery challan and E—way bill are the suggested documents to be carried. 

[JOHN SHANNEL]

Dear Sir, can i use delivery challan in case of inter state movement of goods too? Does rule 55 also applies to inter state movement of samples?

[Sadanand Bulbule]

Dear Sir

Refer Rule 55(1)(c). 

AI Summary

Free sample not a supply; use delivery challan and e way bill; check ITC reversal under applicable rule for distributors. Free product samples sent to distributors are not a supply and do not require a tax invoice; movement should be recorded by a delivery challan. For inter state transport, a delivery challan and an e way bill are recommended. Input tax credit may need to be reversed or restricted for promotional free samples unless the supplier shows the sample cost is absorbed in the sale price, in which case ITC reversal may not be required.