VAT on goods sold free of cost

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Ankit Goyal

Banker

42 Points Posted on 29 December 2007

I have a small query if a person is selling goods free of cost(i.e he is raising the bill with full amount and then showing the discount of same amount at the end,thereby charging nothing from the customer)will he be chargeable to VAT under Punjab VAT act,2005 on such goods?And what are the applicable sections in this regard?

Note-The goods sold above are not covered with in the defination of tax free goods.

Replies (3)

CA. O.P. Agarwalla

C.A.

2402 Points Posted on 02 January 2008

If goods are distributed free of cost, normally no ITC is available. However there is no such restriction- if one is selling such goods even at negligible price.

Adv. S Sharma

Lawyer

339 Points Posted on 03 January 2008

well in case of excise before 2-3 years the duty is levied on the free samples. for example in a packet or box if 10 pices for sale nd 1 piece for free sample then duty is levied on all 11 pieces nt on 10 pieces. cost is to be detrmined on all pieces. 1 piece = rs 10 (free sample) 10 piese = rs 100 total cost for 10 pieces is 110 nd one piece as sample. therefore cost of one piece is 11