1. We are in manufacturing of rubber products which are used by various auto industries. For making this Rubber Products we have to develop & make tool/mould. We are giving this job of making the tools/moulds to other party who in return charges us VAT in the bill.
2. The sale of moulds/tools is not included in our main business.
3. We are also exporting the Rubber Products. The export party wants the two separate bills i,e. tool cost and regular sale.
4. The export party gives us tool cost amount in advance separate from regular export sale.
5. We are taking the Input VAT credit on the making of the moulds/tools.
6. The moulds/tool physically remains with us as a property of the export party. They are not physically exported outside the country.
7. The export party after the completion of said order (say after 5-10 years) demands the scarp value of the above moulds and tool.
Our queries are as follows:-
1. Whether we have to consider the sales of mould as export sale or treat the whole receipt as indirect income.
2. Are we liable to pay “VAT” OR “Service tax” on the above sale of Moulds/tools? If yes, please give a detail idea as how ?
3. Whether we can show the above tools as our asset and claim the depreciation on the above moulds/tools?
24 September 2008
with respect to query 1: when the goods are not going outside the territory of india the question of treating export sales does not arises
with respect to query 2: as the goods (moulds/tools) are the proeprty of the export party, ownership remains with the party and it has been given to you for use (full control is given) attract vat as right to use under local vat as property got manufactured within the state and export party became the owner of the goods he will become a dealer under the local vat act.
I am really impressed with the standard of your replies. Sir, I beg to differ on your opinion relating to second query. Sir,in my opinion, being the manufacturing company is selling the moulds & tools, it will charge VAT on such sales. Though the right to use is trfd by the outside dealer, no VAT is leviable on him, becuase sales consideration is Nil.
However, as the outsider dealer is charging scrap value for such tools, the same will be a sale made in the state of dealer and if the total yearly sale proceeds of such scraps exceeds the taxable quantum, he will also be liable for registration in the state of manufacturer.
I am really impressed with the standard of your replies. Sir, I beg to differ on your opinion relating to second query. Sir,in my opinion, being the manufacturing company is selling the moulds & tools, it will charge VAT on such sales. Though the right to use is trfd by the outside dealer, no VAT is leviable on him, becuase sales consideration is Nil.
However, as the outsider dealer is charging scrap value for such tools, the same will be a sale made in the state of dealer and if the total yearly sale proceeds of such scraps exceeds the taxable quantum, he will also be liable for registration in the state of manufacturer.
with respect i will accpet your contention that, there is no sale consideration from the exporter side for utilising the mould/tool by the manufacturer, therefore it does not amounts to sale.
I could not able to understand the piont no.5 of Mr. monil shah that they are claiming input vat on the manufacture of mould / tools. How they can claim input tax credit on the making of mould/tool, when the property does not belongs to them?
If I undersood the question correctly, that the moulds are sold to outside parties (and as I said the Local VAT is applicable on such sale), that is why I think they are claiming ITC.
CAclubindia
