VAT on free goods

[kavita agarwal]

Hello,

Is there any VAT on goods given as free of cost basis and what is the procedure of invoicing the same.?

[Ramanujam Varadarajan]

If there is no consideration, explicitly or implictly and goods are provided on FOC basis, there would be no VAT.  Invoice is to be raised for FOC / value charged at Re.1 etc.

However, it may impact availment of VAT input tax credit on the goods if purchased locally

 

[Harish Chander Bhatia]

Further to reply of Sh Ramanujam, the input VAT, if goods purchased locally, will not be permitted, and that adjust in reduction of input VAT is must.

[Harish Chander Bhatia]

Further to reply of Sh Ramanujam, the input VAT, if goods purchased locally, will not be permitted, and that adjust in reduction of input VAT is must.

[CA.S Ganesh]

Generally, VAT is to be collected on sale of goods to a person in a consideration.

 

If goods are given at free of cost, i.e, sample does not attract VAT. But if It is dutiable product, then it has excise duty liability.

[RAMASWAMY KRISHNAIYER]

Madam,

If the goods are given free as trade discount, then the said free issues are not assessable.Similarly IPT on such goods also need not be reversed. This is on the principle that the price charged on goods sold is already inclusive of the trde discount in terms of qty.

However when the goods are given free as compliments then the said issue even though not assessable (since there is no consideration), the IPT on such goods have to be reversed.

CA. K. Ramaswamy (Prakash)

 

[Madhav Aphale]

If goods supplied free of Cost under warranty, still is there any impatct  on vat input?

[Ramanujam Varadarajan]

Goods given on FOC basis under warranty replacement would not  be liable to VAT.  The goods under warranty arranement may be supplied thru deivery challan referring clearly that it is supplied as Warranty replacement on FOC basis.

[kavita agarwal]

We are a trading concern dealing in Electronic products , in case we want to give DVD player free along with home theater then what will be the the treatment for the same in books/how to invoice the same.?

AI Summary

VAT on free goods may not apply where no consideration exists, but input tax credits may require adjustment. VAT does not apply to goods supplied free of cost where no consideration exists; suppliers may invoice such transfers as FOC or at a nominal value. Free issues treated as trade discounts are not assessable and do not require input tax reversal, whereas complimentary free supplies require reversal or adjustment of input tax. Warranty replacement goods supplied FOC are not liable to VAT and should be recorded via delivery challan indicating warranty replacement.