4.a. Are goods supplied free to retailers as incentive stock, subject to GST? For example, if a pharmaceutical distributor runs a promotional campaign in which 20 'bonus' products are given to Pharmacists who achieve their monthly sales targets.
Non-interpretative – straight application of the law.
Subsection 9-10(2) provides that a supply includes an entry into, or release from, an obligation:
- to do anything; or
- to refrain from an act; or
- to tolerate an act or situation.
It is considered that where a Pharmaceutical Distributor runs a promotional campaign in which 20 'bonus' products are given to a Pharmacist for achieving their monthly sales targets, the 20 products represent consideration for a supply made by the Pharmacist to the Pharmaceutical Distributor for entering into an obligation to promptly turnover stock.
That is, the 20 'bonus' products are supplied on condition and in consideration for the Pharmacist entering into an obligation to promptly turnover stock and will be subject to GST.
It is important to note that in determining whether GST applies to goods supplied as incentive stock, each case is determined on its merits.