Goods given free of cost to end users

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Bharath CV (Querist)

07 December 2010 What is the treatment under karnataka valued added tax act 2003 regarding goods which is purchased by paying vat given to end users free of cost.does it amounts to sale, pls explain and how can we account it in vat 100.

S. Karthi

S. Karthi (Expert)

08 December 2010 If you selling goods as free of cost to end user. you no need to deduct VAT tax. so, you have 2 options to prepare invoice.
1) You can make invoice without sale value & VAT output value (only inventory affect)
2) if you want to show the sales value for increasing the sales turnover. you must discount 100% the sales value on the same invoice for such cases and no need to deduct VAT tax.

Ravi Shankar

Ravi Shankar (Expert)

08 December 2010 Mr Bharath,

If the goods are delivered FREE of cost to the end user and you have previously availed the input credit of the VAT paid on the purchase of such goods, you will have to reverse the VAT input so availed in respect of the goods distributed free of cost. Please check with your VAT Act for the relevant sections.

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