FOC Meaning
A trade scheme in which the buyer receives additional units free of cost upon purchasing a qualifying quantity.
Full definition
| Full form | Free of Charge |
|---|---|
| Main use | Free units in a quantity trade scheme |
| Other uses | Samples, damage replacements, display stock |
| Buy 10 get 1 free, effective discount | 9.1% on units received |
| Invoice value | Zero |
| Actual cost | Full inventory cost, recovered by claim |
| GST, genuinely free supply | Input tax credit generally requires reversal |
| GST, billed on same invoice | Usually treated as a discounted supply |
FOC stands for Free of Cost, a trade scheme where extra units are shipped free alongside the paid order. The classic form is 'buy 10, get 1 free' or 'buy 2 cases get 1 case free.' FOC is the most popular promotion format in Indian FMCG because it drives volume without lowering the sticker price of the product.
FOC schemes are particularly effective for new product launches (sampling via the trade), liquidation of slow SKUs, and festival pushes. The free SKU can be the same as the paid SKU (equivalent to BOGO) or a different SKU for cross-selling, e.g., buy 10 cases of shampoo and get a free conditioner.
Under GST, free supplies to related parties can attract tax on input credit availed, so a proper scheme engine tags FOC units distinctly in invoices and feeds them into compliance reports.
How FOC Works in a Scheme
The dominant use is the quantity scheme: buy ten cases, get one free. The commercial effect is a discount expressed in product rather than money, and the arithmetic catches people out. An eleven-for-ten offer is an effective discount of about 9.1% on units received, not 10%, because the free unit spreads across eleven units rather than ten. Costed the other way, you give away one unit per ten billed, which is 10% of billed volume. Mixing the two conventions across a year produces a material variance.
Why It Is Not Free
FOC goods carry no invoice value but full inventory cost. Where the brand funds the scheme, the distributor issues the free goods and claims reimbursement afterwards; if that claim is rejected for missing documentation or filed after the window closes, the distributor absorbs the entire cost. On a thin-margin SKU an unreimbursed FOC scheme does not reduce profit, it eliminates it. Our guide to FOC goods in sales works the numbers and covers the GST treatment, and the scheme management pillar covers how schemes are configured and claimed.
Real-world example
A snacks brand runs 'Buy 24 cases, get 2 cases free' across all Tamil Nadu distributors for the Pongal week.
FOC (Free of Cost): common questions
The questions people ask most often about foc (free of cost) in Indian distribution.
FOC stands for Free of Charge: goods supplied to a customer without payment, most commonly the free units in a quantity trade scheme, but also samples, display stock or replacements for damaged goods.
About 9.1%, not 10%. The free unit spreads across the eleven units actually received rather than the ten paid for. Distributors who cost such schemes at 10% consistently under-recover across large volumes.
It depends on structure. For genuinely free supplies such as samples, input tax credit attributable to those goods generally has to be reversed. Where free units appear on the same tax invoice as paid units, the transaction is commonly treated as a discounted supply of the total quantity.
Because free goods carry no invoice value but full inventory cost. If the claim against the brand is rejected or filed late, the distributor absorbs the whole amount. Most distributors track what they claimed but not what they actually issued, and the gap is pure loss.
No. Including free units in volume achievement inflates apparent performance and distorts every per-unit metric downstream. FOC should be booked as scheme spend.
Go deeper
Guides that use this term
The definition is the starting point. These walk through what it means for a working distribution business in India.
Where it applies
Applicable industries
This term is relevant across the following SpireStock-supported industries.
How SpireStock handles it
Related SpireStock features
The concepts described above are implemented end-to-end in these product modules.
Keep learning
Related terms
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