We are a registered dealer (manufacturer) in Tamil Nadu purchasing materials locally and from interstate and selling the manufactured goods (Garments) both locally and out of the state (interstate). The interstate sale includes with or without Form 'C'. While effecting interstate with Form 'C', the CST chargeable is lesser than the local VAT rate and when the interstate sale is without Form 'C', the CST chargeable is equal to local VAT rate.
In this scenario, please let me be clarified on account of the following:
1. Whether we need to reverse the input tax credit as CST chargeable on the interstate sale with Form 'C' is lessor than the local VAT output tax (5%) and input tax on purchase (5%)
2. If so, say, we have charged CST 1% on interstate sale with Form 'C' and the input tax credit we have taken on local purchase is 5%, whether we need to reverse a sum equal to the difference between the ITC and CST charged i.e., 4%.
3. If yes, as we have compensated the revenue loss by 4%, why are we under the obligation of collecting Form 'C' from the customer and submitting the same to sales tax department?