Excise + VAT on FOC Material (Buy 10 Get 1 Free)

[V K]

Dear All

we have a manufacturing unit and to promote the sales we want to give FOC scheme to our customers, as Buy 10 and Get 1 Free.

Expert advice required on following points.

FOC will be billed as zero Value along with other taxable items and Sales Tax will not be paid on Zero Value products. as per statutory concerns , this is Free Sales , not Tax Free Sales and Excise Duty along with Sales Tax will be required to pay on that also.

We can sell the products on lower Value / at Cost , But can not give the same as FOC, W/o paying Tax to State Govt.

All the discounts except FOC ( given on Invoice ) can be admissible as Trade Discount, for FOC Items we can give the discounts after charging of Tax on Invoice.

States collecting Entry Tax can raise the Issue at Check post on Zero Value

Pls advice against the above points..

Regards.. Vikas kapoor

[YAGAY andSUN]

Dear Vikas,

Central Excise Duty would be paid on the FOC goods, Input Tax Credit would be burnout under the VAT Laws and Entry Tax would be paid on the deemed value (i.e. 110% of Cost +Excise Duty+ ITC reversal) in this matter.

Regards,

NeelamTaneja(Executive Consultants)

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

AI Summary

Manufacturers must pay excise duty on free items in promotions; VAT input credit reversals apply. Calculate entry tax on deemed value. A manufacturing unit seeks advice on a sales promotion strategy involving a 'Buy 10 Get 1 Free' offer. The concern is whether excise duty and VAT apply to free-of-charge (FOC) items, billed at zero value. It is clarified that excise duty must be paid on FOC goods, and input tax credit will be reversed under VAT laws. Entry tax should be calculated on a deemed value, which includes cost, excise duty, and ITC reversal. The discussion emphasizes that FOC items cannot be exempt from tax, and discounts must be handled post-tax on invoices.