We are manufacturing of Pharmaceutical Machinery registered under GST Act. In routine course we require to send material for free of cost to our customer.
While sending the FOC material we will charged GST as per law with tax invoice. In this case we are not recovering any cost from our customer also we are costing the material 110%.
My question is that invoice we will prepare for the above transaction what type of precaution we will take so that our finance department is not debited the amount to customer account and follow up for payment.
Clarification on FOC Materials Under GST: No GST on FOC, Reverse Input Tax Credit per Rule 17(5), Use Delivery Challan. A discussion on a forum addresses the issue of sending free-of-cost (FOC) materials under the Goods and Services Tax (GST) framework. A manufacturer of pharmaceutical machinery inquires about invoicing procedures for FOC materials to ensure their finance department does not mistakenly charge customers. One response advises that the taxable value should not be less than market value. Another response clarifies that while GST is not applicable on FOC materials, Input Tax Credit must be reversed according to Rule 17(5) of the CGST/SGST Act, and such materials should be dispatched using a Delivery Challan. (AI Summary)
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