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Plz guys do the needful

anitha (article) (85 Points)

09 December 2009

hi guys plz suggest me a solution :

A company's head office is in chennai.It has various branches in India.Every branch made sales and billed them from their respective states only.But all their accounts are maintained by the head office which is in chennai.While making sales every branch billed the sales by applying their own states' VAT.Now my question is while making accounting entries in head office whether such sales is to be taken as CST or VAT.Pls provide me a solution and a valid reason for the same.Thanks for ur help in advance.

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4 Replies

Shyam Lal Naik (Service) (6156 Points)
Replied 09 December 2009

The place of accounting can not determine the nature of the transaction.

If vat is charged, it will be treated as intra state sales. If CST is charged, it will be recorded as inter state sale.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 09 December 2009

your accounting in head office has no relevance to determine sales as VAT OR CST .It is the Branch (Originating place for sales ) will determine whether it is a vat sale or CST.Why in head office you are bothered about it has to do nothing on this

Anand (CWA (final) Asst Manager) (49 Points)
Replied 09 December 2009

Situation 1 - If the material is purchased by Head Office and supplied to the branch -

Stock transfer from Head office to branch with NIL sales tax against form 'F' (subject to the branch is registered under Sales Tax Act).

Local sales tax (VAT) or CST (as applicable*) should be charged on the sale from the branch office.

Accounting - Branchwise / Statewise local tax (VAT) / CST payable accounts should be created in the books of head office and paid off statewise accordingly.

Situation - 2 - If the material is purchased by Branch -

Separate branch accounts should be maintained at Head Office and VAT or CST (as applicable*) laibility is created for each branch.

*Local taxes will be charged by branch for Intra State sale and CST for inter state sale.

Somesh Ganguly (proprietor) (25 Points)
Replied 10 December 2009

My suggestion, you should start to issue all invoice from Head office with charge of CST in case of inter state sale. It will help to you for make your account simplified and centralised. Branch only receive the P.O and forward the same to H.O.