Free Samples for Sales Promotion

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Excise is calculated on the assessable value (cost+profit).

If Free goods are given for Sales Promotion, like, 1 box free with 12 boxes, would the 1 free box be charged for excise calculation or its value be excluded for excise.

I talked to our Range Supridentent and he told me that if I am getting consideration ONLY for 12 boxes, then that 1 free box would not be charged for excise purpose. Only 12 boxes Assessable Value would be taken for calculation.

However while reading excise chapters, i have come to know that in most of the cases, the courts have favoured the revenue department and wants excise to be levied on that free item as well.

Another thing, would i have to intimate the Excise Dept of my intention to give free item for Sales Promotion?

Can an informed senior member help me on this regard?

Replies (6)

Will anybody kindly help me out? ITS URGENT!!!!

Will excise duty be payable on the free samples?

Yes,....excise duty should be payable for free samples given for sales promotion & also the receiver 's not eligible to avail the cenvat credit on that.

Thanks for the response but when i discussed this issue with Superintendent of our Division, he told me that if i take consideration(money) only for 12 items and give 1 item as free, then excise will be payable only for the 12 items and not 13. I am really confused now :(

The removal of free sample will receive the same treatment as the goods removed for the home consumption. It will be removed under an Invoice after making the due duty, unless the removal of particular sample is exempted from duty by any Notification.

Hello Rahim,

As Mr. Prabhat and Mr. Chauhan rightly said the free sample will attract payment of duty. But as per Apex Court in the case of M/S Vinayaka Mosquito Coil Mfg. Co. Quantity discount is also deductible. Now even you are removing 13 units buit 1 unit is quantity distcount. Hence, only the value of 12 units is chargeable

eg: The invoice can be prepared as follows:

Sales price                                            13 units @ 100                -             1300

less: Quantity Discount                       1 unit @ 100                    -                100

Sales Value                                                                                                        1200

ED @ 8%                                                                                                                 96

 

Thanks & Regards

 

Rajesh Ahuja

Thanks for clearing the doubts and never knew about the quantity discount :concept :) Should I need permission from the dept to go ahead with this sales promotion scheme?


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