Accounting Issues of Free Samples

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This discussion covers the accounting treatment for free samples received at a nominal cost, including how to record them as purchases and include them in stock. It also addresses the practical implications of issuing credit notes and fresh invoices for damaged goods returned by customers, and how to account for replacement items provided under warranty with zero value. The guidance clarifies that GST is not applicable on such warranty replacements, and goods can be sent via delivery challan as per CGST Rules.

SUDHEEP M

SUDHEEP M (Querist)
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10 January 2022 Sir,

I have received free samples of 10 quantity at a nominal price of Rs. 100 ( issued separate invoice by the supplier) . How can I account the same in my company books of account.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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10 January 2022 Account it as purchase as Rs 100 paid and include it in stock.

SUDHEEP M

SUDHEEP M (Querist)
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13 January 2024 Sir,

I want know the Practical solution in respect of the following case. One of my client was a trader in building material. One of the product I have sold to the customer was damaged one and the same was returned. In that case I have settled the issue by issuing credit note in respect of the same and issuing the fresh sale invoice. As per conversation with supplier they have provided new item under delivery challan with zero value. I want to know the practical implication in respect of the same. How can we account this DC documents. Under GST this DC documents was enough for Replacement (DC does not show any tax portion and it was shown under zero percentage- whole value was shown as discount). Please provide an immediate solution.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 January 2024 Where free replacement is provided to the customers without consideration under warranty, no GST is chargeable on such replacement. In such cases goods may be sent on delivery challan as provided in rule 55 of the CGST Rules, 2017.

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