SAP SD Free Goods Determination in S/4HANA
Inclusive vs exclusive · VBN1 · TANN & R100 · calculation rules · troubleshooting · Last updated October 2026
“Buy 10, get 2 free” is one sentence in a sales meeting and four decisions in SAP: does the customer receive 10 or 12, who decides the free item is free, what happens at 25 units, and does the free line ship with the rest?
This guide answers all four. It covers inclusive versus exclusive with the quantities worked through, the condition technique behind free goods, the VBN1 record, the three settings that actually make the free line cost nothing, the calculation rules that decide partial quantities, and what to check when the promotion does not appear. Written for SAP S/4HANA on-premise and Private Edition; the mechanism is unchanged from ECC.
On this page
What free goods determination is
Free goods determination is the condition technique pointed at quantity instead of price. When a customer orders a qualifying quantity, SAP adds a free-of-charge item to the order automatically — no manual line, no pricing override, no hoping the order desk remembers the promotion.
It is heavily used in FMCG, pharmaceutical distribution and anywhere trade promotions run: a case free with every ten, a sample with a new product, a seasonal bonus for one customer group. The commercial decision sits in a condition record that a product manager can maintain; the system takes care of the rest.
Free goods is a discount in kind, not in money. A discount reduces the price of what was ordered. Free goods changes what is shipped. That difference is why it needs its own condition technique, its own item category, and its own line on the order.
Inclusive vs exclusive
The first question to settle, because the same promotion means two different invoices:
Scroll the diagram sideways to see all of it →
| Inclusive | Exclusive | |
|---|---|---|
| Order of 10 | Pay for 8, receive 10 | Pay for 10, receive 12 |
| Where the free units come from | Out of the ordered quantity | Added on top of it |
| Free material | The same material only | Can be a different material |
| What the customer sees | Same quantity, lower value | More goods, same value |
| Typical use | A price concession expressed in goods | A bonus pack, a sample, a trade promotion |
A third variant is worth knowing: inclusive without item generation, where no sub-item is created at all and the discount lands on the main item instead. It uses condition type NRAB with requirement 59 and alternative condition base value 29. Choose it when the business does not want a second line cluttering the order and the invoice.
Business example: buy 10, get 2
A beverage distributor runs a trade promotion with a supermarket chain: two cases free for every ten ordered, for the festive quarter only. Exclusive, because the business wants the customer to receive more goods rather than pay less.
| Field in VBN1 | Value | What it decides |
|---|---|---|
| Minimum quantity | 10 CS | Below this, no free goods at all |
| For / free goods quantity | 10 CS → 2 CS | The ratio of the promotion |
| Free goods category | Exclusive | 12 cases delivered for 10 ordered |
| Calculation rule | 2 — unit reference | Partial quantities earn nothing; see the rules section |
| Valid from / to | 01.10.2026 – 31.12.2026 | The promotion ends by itself |
| Delivery control | per business rule | Whether the free cases may ship separately |
The supermarket orders 30 cases. SAP creates the main item for 30 cases at the agreed price, plus a sub-item for 6 cases at zero. The delivery ships 36 cases; the invoice shows 30. In January the record expires and orders go back to normal with nobody changing anything.
Scroll the diagram sideways to see all of it →
Free download
Free: SAP SD Interview Starter Kit
A free sample of The SD Vault, sent to your inbox. No payment, no account.
- ✓25 most-asked interview questions, with full answers
- ✓1 complete configuration scenario, IMG paths and T-codes
- ✓A 7-day prep plan you can actually follow
One email with your kit. Occasional SAP SD tips after that — unsubscribe any time.
The condition technique
Same five building blocks as pricing, pointed at a different outcome:
| Building block | In free goods |
|---|---|
| Condition table | The key — typically customer and material, or material alone |
| Access sequence | The search order, most specific key first |
| Condition type | NA00 in standard |
| Procedure | NA0001 in standard |
| Activation | Sales area + document free goods procedure + customer free goods procedure |
| Condition record | The VBN1 entry: quantities, rule, category, validity |
A detail that trips people up: activation uses the free goods procedures from the sales document type and the customer master — not the document and customer pricing procedures. They look alike on the screen and are different fields.
Configuration step by step
Check the condition technique objects
SPRO → SD → Basic Functions → Free Goods → Condition Technique for Free Goods
Standard delivers condition type NA00, its access sequence, and procedure NA0001. Copy rather than change if you need a different key — the same discipline as pricing.
Activate free goods determination
SPRO → Free Goods → Activate Free Goods Determination
Assign the procedure to sales area + document free goods procedure + customer free goods procedure. Note those last two are the free goods procedures, not the pricing ones — they come from the sales document type and the customer master respectively.
Item category determination for the sub-item
VOV4
OR + NORM + usage FREE + higher-level item category TAN → TANN. The usage FREE and the higher-level item category are what make the sub-item free; without this row the free item cannot be created.
Item category TANN
VOV7
Pricing indicator B (free goods — 100% discount), billing relevance blank so the free line is never invoiced, and schedule lines allowed so it can be delivered.
Pricing procedure: R100
V/08
Add condition type R100 with requirement 55 and alternative condition base value 28. This is what actually prices the free line at zero — see the section below.
Create the condition record
VBN1 (change VBN2, display VBN3)
The business-facing step: minimum quantity, the "for" quantity, the free quantity, calculation rule, free goods category and delivery control. Master data a product manager can own once the rest is in place.
TAN, TANN and how the free line prices at zero
This is the part most tutorials skip, and the part that breaks on projects. Nothing about TANN makes an item free by itself — three settings have to agree:
TANN carries pricing indicator B
B means "free goods". It marks the line as a candidate for the 100% discount. A blank pricing indicator here is the single most common reason a free item gets charged.
R100 carries requirement 55
The requirement checks that the item is a free goods line. Without it, R100 would try to apply everywhere and discount things that should be paid for.
R100 carries alternative condition base value 28
Formula 28 makes the discount the full value of the line. This is what turns the marked line into a zero.
The sub-item itself is determined like any other item: item category determination with usage FREE and the higher-level item category TAN gives TANN. TANN also has billing relevance blank, which is what keeps the free line off the invoice while still allowing it to be delivered.
Calculation rules and scales
The promotion says buy 10 get 2. What happens at 25? That is the calculation rule, and it is a commercial decision disguised as configuration:
| Rule | Name | Behaviour | Order of 25 |
|---|---|---|---|
| 1 | Pro rata | The free quantity scales proportionally with whatever is ordered. | Buy 10 get 2: an order of 25 earns 5 free (proportional, then rounded). |
| 2 | Unit reference | The order is rounded down to whole multiples of the condition quantity, then the ratio applies. | Buy 10 get 2: an order of 25 earns 4 free — two complete blocks of 10, the remaining 5 earn nothing. |
| 3 | Whole units | Free goods are granted only when the order is an exact multiple of the condition quantity. | Buy 10 get 2: an order of 25 earns nothing. An order of 30 earns 6. |
Alongside the rule, the minimum quantity sets the floor below which nothing is granted, and a scale on the record lets the ratio improve with volume — two free at 10, but five free at 20. Rounding behaviour differs between the rules, so if the business is sensitive to exact quantities, test the boundary cases rather than the happy path.
Delivery and billing behaviour
Downstream, the free line behaves like a normal item with one exception: it is never invoiced.
- →Delivery. The TANN sub-item is delivery-relevant and picks, packs and posts goods issue like any other line. Stock really leaves the warehouse, and COGS posts for it.
- →Delivery control. A field on the VBN1 record decides whether the free item may be delivered independently of the main item, partially, or only together with it.
- →Billing. Billing relevance on TANN is blank, so the line never reaches the invoice. The customer sees the paid quantity and the free quantity is visible on the delivery note.
- →Margin. The cost of the free goods is real and lands in COGS with no matching revenue. That is what makes free goods a promotion to be measured, not a setting to be left running.
Because the free line is delivered, it also consumes availability. A promotion that doubles demand on a material with tight stock will show up in the availability check as unconfirmed quantities — worth checking before a campaign goes live, not after.
Troubleshooting
No free goods sub-item appears in the order
- ·Free goods determination is not activated for this sales area and procedure combination
- ·No VBN1 record for this customer and material, or the order date is outside its validity
- ·The ordered quantity is below the minimum quantity on the record
- ·Calculation rule 3 and the quantity is not an exact multiple
- ·No VOV4 row for usage FREE with higher-level item category TAN
Fix: Check the order quantity against the record first — minimum quantity and calculation rule explain most "it worked yesterday" cases. Then the activation table, then VOV4.
The free item appears but is being charged
- ·R100 is missing from the pricing procedure
- ·R100 has no requirement 55 or no alternative condition base value 28
- ·The TANN item category has a blank pricing indicator instead of B
Fix: All three work together: TANN says "this line is free goods", requirement 55 lets R100 apply only to such a line, and formula 28 makes the discount 100%. A blank pricing indicator on TANN is the single most common cause.
The customer is charged for the main item but the quantities look wrong
- ·Inclusive was configured where the business expected exclusive, or the reverse
Fix: Inclusive takes the free units out of what was ordered (10 ordered, 8 paid, 10 delivered). Exclusive adds them on top (10 ordered, 10 paid, 12 delivered). Confirm which one the promotion actually means before touching anything else.
The free goods item is not delivered with the main item
- ·Delivery control on the VBN1 record allows them to be delivered independently
- ·Availability differs between the two materials
Fix: Delivery control decides whether the free item can ship separately, partially, or only together with the main item. Set it to match what the warehouse and the customer expect.
Free goods stopped working after the material changed
- ·The record is keyed on the material that changed
- ·A substitution replaced the material before free goods ran
Fix: Free goods records are material-specific. If material determination swapped the material, the free goods record must exist for the substitute — not the material the customer typed.
ECC and S/4HANA
ECC, S/4HANA on-premise and Private Edition: everything on this page applies unchanged. NA00, NA0001, VBN1, TANN and R100 have been stable for a very long time, which is why ECC experience transfers directly.
S/4HANA Public Edition: the concepts are the same, but there is no SAP GUI configuration. Condition records are maintained through the relevant Fiori apps and the underlying settings through the cloud configuration environment, with a narrower set of options. Say so plainly if a client is on Public Edition rather than describing SPRO paths they cannot reach.
Interview questions
What is the difference between inclusive and exclusive free goods?
Inclusive means the free quantity is part of what was ordered: order 10, pay for 8, receive 10. Exclusive means the free quantity is added on top: order 10, pay for 10, receive 12. Exclusive can also deliver a different material as the free item; inclusive cannot.
How is free goods determination configured?
The condition technique: condition type NA00 on its access sequence in procedure NA0001, activated per sales area with the document and customer free goods procedures. Then item category determination for the sub-item (usage FREE, higher-level item category TAN, giving TANN), R100 in the pricing procedure, and the condition record in VBN1.
How does the free item end up costing nothing?
Three settings together. TANN carries pricing indicator B, which marks the line as free goods. Requirement 55 on condition type R100 means it only applies to such a line. Alternative condition base value 28 makes that discount 100%. Remove any one and the free item gets charged.
What are the free goods calculation rules?
Rule 1 pro rata — the free quantity scales with the order. Rule 2 unit reference — the order is rounded down to whole multiples of the condition quantity first. Rule 3 whole units — free goods only for exact multiples. The rule is what makes an order of 25 earn 5, 4 or nothing on a buy-10-get-2 deal.
What is inclusive free goods without item generation?
A variant where no sub-item is created at all — the discount is applied to the main item instead, using condition type NRAB with requirement 59 and alternative condition base value 29. Useful when the business does not want a second line on the order and the invoice.
A customer says the promotion is not being applied. How do you investigate?
Check the ordered quantity against the minimum quantity and the calculation rule on the VBN1 record, then the validity dates, then whether free goods determination is active for that sales area and document type, then the VOV4 row for usage FREE. In that order — the data causes are far more common than the configuration ones.
More of these, graded by depth, in the SAP SD interview questions collection.
Where this sits in the SD landscape
Free goods sits between pricing and the item: it uses the same condition technique as the pricing procedure, creates a sub-item through item category determination, and then travels through the rest of the Order-to-Cash process like any other line. If a material substitution is also in play, remember free goods records are keyed on the material that ends up on the item.
Frequently Asked Questions
What is free goods determination in SAP SD?
It is the condition technique applied to promotions: when a customer orders a qualifying quantity, SAP automatically adds a free-of-charge item to the sales order. It supports both inclusive deals, where the free units come out of the ordered quantity, and exclusive deals, where they are added on top.
What is the difference between inclusive and exclusive free goods?
With inclusive, ordering 10 means paying for 8 and receiving 10. With exclusive, ordering 10 means paying for 10 and receiving 12. Only exclusive free goods can deliver a different material as the free item.
Which transaction creates free goods condition records?
VBN1 creates them, VBN2 changes them and VBN3 displays them. The record holds the minimum quantity, the "for" quantity, the free quantity, the calculation rule, the free goods category and delivery control.
What is item category TANN?
TANN is the free-of-charge item category. It is determined for the sub-item through usage FREE and the higher-level item category TAN, carries pricing indicator B so the line counts as free goods, and has no billing relevance so it is never invoiced.
What is condition type R100?
R100 is the 100% discount applied to the free goods line. In the pricing procedure it carries requirement 55, so it only applies to a free goods item, and alternative condition base value 28, which makes the discount the full value.
What are the three free goods calculation rules?
Pro rata (1), unit reference (2) and whole units (3). They decide how a partial quantity is treated — whether an order of 25 on a buy-10-get-2 deal earns 5 free, 4 free, or none at all.
Why are my free goods not appearing in the sales order?
Most often the ordered quantity is below the minimum quantity on the record, the calculation rule requires a whole multiple, the record has expired, free goods determination is not activated for that sales area and document type, or the VOV4 row for usage FREE is missing.
Did free goods change in S/4HANA?
No. The condition technique, VBN1 records, TANN and R100 all work as they did in ECC for on-premise and Private Edition. In Public Edition the same settings are maintained through the cloud configuration environment rather than SAP GUI.
Written by
Rahul Narain Saxena
SAP SD Solution Architect with 17+ years of hands-on implementation experience across SAP ECC and S/4HANA. Every guide on The SD Vault is written from live project experience, not summarised from documentation.
“The free item is being charged. Why?”
Three settings have to agree, and naming all three is what separates someone who has configured free goods from someone who has read about it. The SD Vault has 230+ depth-graded questions and 38 real configuration scenarios, including free goods end to end.
Get Lifetime Access →Or start free with the sample pack, Pricing Procedure guide, and Item Category guide.