FOC Supplies and Free Samples under GST: Invoice, Tax and Input Credit

Short answer: a genuinely free supply to an unrelated person is usually not a supply under GST, because there is no consideration — so no GST is charged. But the input tax credit on goods given away as gifts or free samples is blocked and must be reversed. Free supplies to related or distinct persons (including your own branches in other states) are still taxable under Schedule I.

This guide explains the general GST rules as published by CBIC. Rates, thresholds and notifications change; confirm your own case with your CA before relying on it.

The four cases people mix up

1. Free samples and gifts to unrelated customers

No consideration, so no supply and no GST. The catch: input tax credit on goods disposed of as gifts or free samples is blocked under section 17(5)(h) of the CGST Act. If you claimed credit when you bought them, reverse it.

2. Free supplies to related persons or your own other GSTINs

Schedule I treats these as supplies even without consideration. Tax is payable on the value worked out under the valuation rules (broadly, open market value). Gifts to an employee up to ₹50,000 in a year are not treated as a supply.

3. Buy one, get one free

This is not a free supply: the customer pays one price for two items. GST is charged on that price, and input credit stays available. CBIC clarified this in Circular 92/11/2019.

4. Replacement parts under warranty

If the warranty price was already included in the original sale, a free replacement carries no further GST and needs no credit reversal (Circular 195/07/2023).

Which document do you issue?

• Free sample to an unrelated person: no tax invoice is needed because there is no supply. Goods in transit move under a delivery challan.
• Schedule I supply: a tax invoice at the taxable value, even though nothing is charged.
• Buy-one-get-one: one tax invoice for the price paid, listing both items.

How this works in Grovia

Grovia raises GST invoices, credit notes and debit notes. It does not issue delivery challans or e-way bills, and it does not reverse input credit for you — record the reversal with your CA.

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Frequently Asked Questions

Is GST charged on free samples?

Not when they go to an unrelated person for nothing — that is not a supply. Input tax credit on those goods must be reversed.

What is an FOC invoice in GST?

A common name for a document that shows goods sent free of cost. If there is no supply, a delivery challan is the right document; if the free supply is taxable under Schedule I, a tax invoice at the taxable value is needed.

Is buy one get one free taxable under GST?

Yes, on the price paid. It is treated as one supply of both items for that price, and input credit remains available.

Can I give gifts to employees without GST?

Gifts up to ₹50,000 per employee in a financial year are not treated as a supply.