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Tax calculation given by vendor invoice

Jemss (SAP Consultant) (42 Points)

01 November 2011

Dear Tax Experts,

I just need your suggestion on the below calculation of Material Price, Here my doubt is :

1) In the above calculation vendor charging VAT 13.5% on Total value (which is inclusive of CST and Transportation charges also) - Is this Possible

Details	Amount
Hue Pump
Price Including Excise	6,00,500.00
CST @ 2%	12,010.00
Transit Insurance, Freight & Toll Tax	30,221.00
Total	6,42,731.00
Entry Tax or VAT @ 13.5%	86,769.00
Grand Total	7,29,500.00

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10 Replies

ashish gupta ( student) (1922 Points)
Replied 01 November 2011

yes freight is included for the purpose of VAT.

but there is another problem i.e. how can he charge both cst and VAT.

if he is charging CST then he cannot charge the VAT.

Jemss (SAP Consultant) (42 Points)
Replied 01 November 2011

Looking for more suggestion ...........................................

Hemanth Sai (CA-FINAL,AUDIT TRAINEE) (110 Points)
Replied 02 November 2011

If he has bought the goods from the previous party by paying cst and tries to resell it he can include cst and charge vat from his seller.

but the thing is that he cannot charge vat on the frieght charges.frieght charges are included in the invoice for collecting it from the vendor as per their agreement, vat cannot be charged on it, i think its a clerical mistake.

this should be the invoice.

price Including Excise	6,00,500.00
CST @ 2%	12,010.00
Total	6,12,510
Entry Tax or VAT @ 13.5 %	82,689

Transit Insurance, Freight & Toll Tax

30,221.00

Grand Total

7,25,420

1 Like

Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 02 November 2011

VAT can be charged on freight if it is local (within the state ) . In your case the transportation charges are not local and hence VAT cannot be levied on it as per VAT LAW . I agree with the calculation of HEMANT SAI . For the buyer the purchase price is 6,12,510 and VAT @ 13.5 % should be 82,689 .

2 Like

chandra shaker (TAX PRACTITIONER) (59 Points)
Replied 04 November 2011

Here in this case under CST act ,the Transportation charges should not be included in the net/cost price of the commodity for the purpose of VAT calculation ,under cst a dealer can raise tax against Form 'c' OR with out form 'C' OR applicable rate of taxes under the respective State Acts, in continuation if any entry tax raised under ENTRY OF GOODS ACT ,by the other state ,then the respective buyer will adjust the sales tax already paid on the said bill and remaining balance will be collected by the concerned assessing authority or check-post authority. More over few goods are exempted from payment of entry tax by the latest amendments.

G.S.CHANDRA SHAKER,

SALES TAX CONSULTANT.

2 Like

Hemanth Sai (CA-FINAL,AUDIT TRAINEE) (110 Points)
Replied 09 November 2011

@ harshal

Is it true that vat can be charged frieght if it is local?how do u say that?
r u saying about the vat charged by the trasporter?
because here the seller is collecting the frieght charges incurred by him from the vendor.

Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 10 November 2011

Yes VAT is to be charged on the freight if it is local ( within the state ) . As per VAT LAW all the expenses incurred by the seller for making the sales is to be included in the SALE PRICE except the Insurance COST and VAT is to be charged on the SALE PRICE . However the above law is not applicable in case if the freight or other expenses to make the sales are not local .

Hemanth Sai (CA-FINAL,AUDIT TRAINEE) (110 Points)
Replied 14 November 2011

here other expenses doesnt mean transporations expenses,it means the associated expenses in the production or preparing the product ready for sale....
in actual sellers will collect the transportation charges paid them and get that amount back ...in order to account that in the books they include the transportation charges at the bottom of the invoice and figures out the liability amount...