TaxTMI 
TaxTMI 
When our distributor buys 100 pkts of snacks we give 2 packets free. I want to confirm whether there is VAT payable for the 2 pkts sold. Also please tell in which section it applies.
John Shannel
VAT on Free products
01 May 2011 
2 Replies 
5072 Views Asked by
VAT on free goods: valuation rules may include freebies in the sale price, altering VAT liability.
Whether VAT applies to free items distributed with a sale turns on valuation rules: VAT is levied on sale of goods and, where free items form part of the same transaction, their value may be included in the overall sale price so no separate VAT is charged on the freebies. Treatment can vary depending on the scheme and applicable state VAT provisions, so review and planning are necessary to determine taxability. (AI Summary)
Whether VAT applies to free items distributed with a sale turns on valuation rules: VAT is levied on sale of goods and, where free items form part of the same transaction, their value may be included in the overall sale price so no separate VAT is charged on the freebies. Treatment can vary depending on the scheme and applicable state VAT provisions, so review and planning are necessary to determine taxability. (AI Summary)