VAT on goods sold free of cost

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Ankit Goyal (Querist)
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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 of the bill,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.

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)
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02 January 2008 Normally ITC can not be claimed against goods which have been distributed free of cost. However thee is no restrction regarding claimimg ITC, if the goods are sold at lower price.