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VAT= CST VAT treatment for Purchase Return relating Purchase (VAT)

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This query is : Resolved


( Author )
10 September 2009

Our firm is Retailer (in Maharashtra), is delaer of Sports Shoe Co. We receive purchases from Sports Shoe Co, Gurgaon against C-Form.
In 2008-09 Q3, we Returned material ( old stock/ Non-running Item ) of Rs.9 lakh to Sports Shoe Co, Gurgaon. This material is relating to Purchases within Six months = Rs. 1 Lakh ( Shoes ) and Purchases beyond six months = Rs.8 Lakhs (Shoes)
My consultant says, Purchase Return of Purchase relating beyond six months will not be treated as Purchase Reutn. What does this mean?
I am getting opposite views.
One View is: Purchase Return of Purchase relating beyond six months, should be treated as OMS Sale of my firm to Sports Shoe Co, Gurgaon and accordingly charge CST @ 12.5% or charge 2% CST against C-Form from Sports Shoe Co, Gurgaon.

Other view is: Nothing is to be done, since Proper Credit Note has been recd from Sports Shoe Co, Gurgaon against Debit Note send by us for Purchase Return.

One more view I got is: "Need not to worry..if you have issued proper debit note and also received the credit note from the party.. The restriction of 6 months applies to sales returns and not to purchase returns.. There is no need to pay any CST on purchase returns beyond 6 months... You can directly credit your purchase a/c with full return amount.. "

I am in puzzle. Can you help.

Pl help me to understand the Accounting treatment as well as the CST-VAT Treatment of above Pruchase Return.
If possible, kindly reply on my e-mail.
Regards,
Sanjay Agarwal
snjy_1 @ yahoo.com



CA Kamal Gangaramani

( Expert )
11 September 2009

One more view I got is: "Need not to worry..if you have issued proper debit note and also received the credit note from the party.. The restriction of 6 months applies to sales returns and not to purchase returns.. There is no need to pay any CST on purchase returns beyond 6 months... You can directly credit your purchase a/c with full return amount.. "

This is right.


My consultant says, Purchase Return of Purchase relating beyond six months will not be treated as Purchase Reutn. What does this mean?
Means when the goods are return within six month the seller will be allowed credit/refund of CST paid by him. He may pass this benefit to you. After six month he will not get credit/refund of CST paid so hem may not pass the benefit to you. he may ask you to pay the tax, however this is you personal matter and got nothing to to with tax department.

Hence the view three above is correct. "The restriction of 6 months applies to sales returns and not to purchase returns"


Acounting treatment : you have to credit purchase account and debit shoe companys account. In particular reduce amount from CST Purchase a/c.




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