VAT on Goods given free of cost on sale of specific quantit

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Piyush Jain (Querist)
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01 September 2010 Dear Professional Colleaques,

We are transferreing the goods from our Haryana Factory to Delhi Depots. and make sales from there. We have a scheme that one quantity wil be given free of cost on purchase of 10 quanitiy.

Query: Is VAT will be applicable on Goods given free of cost on sale of specific quantity?
Can Delhi can issue F-Forms to Haryana against stock transfer of 11 quanity. as there is sale if 10 quantity only from Delhi and 1 is given free of cost.

Regards,

Piyush Jain

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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01 September 2010 The general rule of VAT regarding free sample is as follows.
Stock transfer forms from HARYANA should specifically mention that one quantity is free sample.
If Delhi party is also giving one quantity as free, then no tax liability. On the other hand ,if they sell the free quantity for a price VAT attracts to them.
In F form also specific mention may be made regarding the free quantity. Otherwise CST liability may arise to HARYANA party.
However you may refer your state VAT laws before taking a final decision on this matter.

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