In-app purchase renews for free

I have an app which uses in-app purchases. I created 3 subscriptions of the type: non-renewing subscription. However, after purchasing a 1-month subscription, I purchase again and it says already purchased so this is free. Why is that?

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BTW, the app has been tested and approved for sale, but I don't want to release it until this issue is resolved.

It does not say 'for free'. It says 'do you wish to renew or extend the subscription'. Apple has no way of knowing whether the non-renewing subscription has expired and will let a user purchase it over and over and over again. Apple will charge the user each time they purchase the subscription. This is different from a non-consumable IAP which says 'do you wish to download it again for free'.

Well I swear it said 'for free'. Maybe because I was using a test user?

No need to swear. Try it again and see what it says.