Economics students will recall that there’s no such thing as a free lunch and the GST seems to prove exactly that. You know those food freebies that we Indian’s so order? Buy 1 get 1 free, that sort of thing? Well that may soon be a thing of the past as food companies such as Jubilant FoodWorks (Domino’s [no, not Domino’s!]) and Yum Restaurants may put an end to these schemes.
This news comes close on the heels of the implementation of the GST. According to the fine print, companies will be charged additional taxes on anything they give away as ‘free’ to consumers and stand to lose input credit when they classify a product sale as ‘free’.
This would lead to companies having to do away from the time tested (sure to bring the crowds) buy 1 get 1 free scheme and move toward discounting their products.
“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.”
Further clarification from the tax department is needed – but for now – it’s safe to say, food freebies are a thing of the past!