VAT ON Free Goods supply in Jammu state

Manoj (16 Points)

10 May 2007  
Dear Friends
One of my client a pharmaceuticals co. transfer their stock to Jammu and in Jammu C&F of this co. sold to stockist the same.
Actually co. statred a scheme that one purchase of 5 or 10 stockist will get 1 free . Can any one will suggest me whether the above free item is subject to VAT . As  I think free is the parcel packet of actual sale and co. is already charged for original product also co. not charging any penny for free items . so VAT should not be levied on it.
Kindly update me.
regds
Manoj