We have a paid iOS application in the AppStore currently. We are planning to convert it to a free application with in-app purchases. We would want to make the in-app purchases free to the users who have already paid for the application in the previous version. I think this can be done via App Receipt Validation. But will the receipt get updated once the application is converted from paid to free and will the purchase details get lost?
If you convert your app from paid to free, you are still able to inspect the receipt and see which version was originally downloaded and act accordingly.
When we did this in one of our titles, we implemented a three tier system:
We bumped the version of the save file. Any time we promoted from a save file with version <= X (where X is the last one that was on the premium version) we would award the appropriate IAPs (in our case we gave them a coin doubler, an ad disabler and a chunk of coins). You should use this simple mechanism for the majority of the users because receipt checking can require an internet connection, and your users might not be online the first time they boot after an update.
We had a 'restore IAP' button. You need this anyway on iOS if you have any non-consumable IAPs, but we additionally added a check of the App Store receipt which lets you discover whether or not the user originally paid for the game. Here's the tutorial we based our code on, we chose the easy way, but you might need to weigh that up against piracy concerns.
Our reimbursement system also checks a file that we host, which can give out extra coins/doubler unlocks/ad removers. If the receipt checking failed (we supported pre-iOS 7 so we couldn't rely on receipt checking APIs) then we could reimburse users that way if they contacted us. This is a good idea anyway, with luck you'll have a lot more users after you go free, which means more people who will discover some progress-losing bug in your app - it's good to be able to give them stuff in return.
Edit: I'd also recommend keeping track of the user's category in the save file. So, you might have 'free' users who have never paid anything, 'paid' users who downloaded for free but have bought some IAPs, 'premium' users who bought your app when it was paid, and 'premium+' users who bought your app when it was paid AND have since bought IAPs. Even if you don't need this info immediately, it's worth tracking for analytics and so that you can reward your old premium customers with free content in the future if you decide to do so.