Invoicing Free Samples Under GST: What You Must Issue, and When

A free sample is not a supply

Section 7 of the CGST Act defines supply as made for a consideration in the course or furtherance of business. A genuine free sample has no consideration, so it falls outside the charge, and the question of a tax invoice does not arise. You issue no tax invoice and charge no GST.

That is the general rule, and it is also where most explanations stop — which is why businesses get caught by the two things that follow.

You still need a delivery challan

Goods cannot move without a document. Rule 55 of the CGST Rules provides for a delivery challan where goods are transported otherwise than by way of supply, and free samples sit squarely in that category. The challan must carry the date and number, the consignor and consignee details with GSTINs where registered, the HSN and description, quantity, taxable value, and the place of supply for inter-State movement.

Where the consignment value crosses the e-way bill threshold, an e-way bill is required against the delivery challan in the same way it would be against an invoice.

The credit reversal most people miss

Section 17(5)(h) blocks input tax credit on goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples. If you claimed credit on the raw materials or on the finished goods you are now giving away, that credit has to be reversed.

This is the real cost of a sampling programme, and it is frequently discovered during audit rather than planned for. If sampling is a routine part of your marketing, the reversal belongs in your monthly GSTR-3B working rather than being reconstructed a year later.

When a free supply IS taxable anyway

Schedule I to the CGST Act lists activities treated as supply even without consideration. Two of them catch sampling programmes:

1. Related or distinct persons: goods supplied free to a branch in another State, a group company, or an employee beyond the fifty thousand rupee annual exemption are a supply, valued under Rule 28.

2. Principal and agent: goods supplied to an agent who will supply them on your behalf are a supply even when nothing is charged.

So a sample posted to a prospective customer is outside the charge, while the same product sent to your own Mumbai branch for a trade show is not.

Buy-one-get-one and quantity discounts are different again

CBIC Circular 92/11/2019 clarified that a buy-one-get-one offer is not a free supply at all. It is two goods supplied for the price of one, which is a single supply valued at the consideration actually charged. Input credit is not reversed, because nothing has been given away.

The same circular treats volume discounts given through credit notes as a reduction in value rather than a gift, provided the discount was known at or before the time of supply and is linked to the relevant invoices.

Frequently asked questions

### Do I charge GST on a free sample?

No, provided it is genuinely free and the recipient is not a related or distinct person. With no consideration there is no supply under Section 7, so no tax is charged and no tax invoice is issued. The obligation that does arise is the reversal of input tax credit under Section 17(5)(h).

### What document accompanies a free sample in transit?

A delivery challan under Rule 55, in triplicate, carrying the consignor and consignee details, HSN, description, quantity, taxable value and place of supply. If the consignment value exceeds the e-way bill threshold in your State, an e-way bill is generated against the challan.

### Must I reverse input tax credit on samples?

Yes, in almost all cases. Section 17(5)(h) blocks credit on goods disposed of by way of gift or free sample, so any credit claimed on the inputs or on the finished goods must be reversed in the month of disposal. The exception is a promotional scheme like buy-one-get-one, which the CBIC treats as a priced supply rather than a gift.

### How are samples to our own branch in another State treated?

As a taxable supply. Schedule I treats supplies between distinct persons — different GSTINs under the same PAN — as a supply even without consideration. You issue a tax invoice, charge IGST, and value it under Rule 28, which generally permits the open market value or ninety per cent of the price the recipient would charge onward.