Goods cleared as sample for R& D purpose

[Anil Gagneja]

Dear Sir,

 

We have  R & D plant in different location and planning to clear some  raw material as sample after debiting the equivalent cenvat credit taken.

Kindly confirm is their any liability of Central Sales Tax/ VAT on the said raw material.

With regards

Anil Gagneja

[YAGAY and SUN]

Since samples will be removed free of cost, therefore, there would not be any CST/VAT liability. But you would have to reverse the Input Tax Credit.

 

[Anil Gagneja]

Dear Mr. Pradeep Khatri

 

Thanks for your valuable suggestion.

We will send  the sample to our group company.  Is it possible to send the sample to group company on invoice as free sample.

Regards

 Anil Gagneja

 

 

[Mahir S]

With reference to your query dated 20.01.2012, it is to clarfy that even if raw material or Samples are to be cleared to a group company as Free Samples, the same can be cleared only on payment of duty.

AI Summary

Tax treatment of free samples: free-of-cost transfers avoid VAT/CST but require reversal of input tax credit; duty may apply.
Removal of raw materials as free samples for R&D does not ordinarily attract VAT/CST when supplied free of cost, but requires reversal of the input tax credit claimed. Transfers to group or related companies may be treated differently and can require payment of duty or be treated as a taxable disposal; therefore intercompany sample transfers should be documented and the reversal or tax consequences addressed.