4% VAT against 2% CST - Claim

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

15 July 2011 Dear Sir,
We have recently started trading business, supplying to another states also. But my apprehension is:
I purchase the goods here in Mumbai at 4% VAT
And I sell the goods to another state against C Form at 2% CST.

I make a direct loss of 2%, which is merely my profit margin.
Can the difference 2% be claimed or is there any way out of it.

I understand that purchasing from another state against C Form at 2% CST and selling in domestic market at 4% VAT, I have to pay back the difference with the tax of value added on it, but I cannot understand the reverse system.

Please advice urgently.

Thank you.
Regards,
Krunal
Mumbai

U S Sharma

U S Sharma (Expert)
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15 July 2011 vat paid on purchase is available for input credit and can be utilized for vat as well as CST liability to be paid on sales.

CST purchase and CST paid on purchase, is not available for input credit.

in a nutshell VAT is a tax which is available for input credit, while CST is not .

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Querist : Anonymous

Querist : Anonymous (Querist)

15 July 2011 Sir thank you for your response.

But since I do not belong to the accounting line, I do not have a lot of knowledge of it. Can you please explain this to me in a simple language.

Thank you once again.

Krunal.

U S Sharma

U S Sharma (Expert)
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15 July 2011 say your purchase in month of june 2011

within your state
purchase amount 10000 + 400 vat

Out of state purchase

purchase amount 5000 + 100 CST

================================
Your accounts will show .......

purchase ..10000+5100= 15100
VAT ....... 400

================================
now you sold 10000 out of state
CST payable ......@2% = 200
Sale within the state
6000 ..vat payable @4% 240

===============================

you have in balance ...400
CST adjusted ......200
VAT adjusted ......200
Balance ...of vat (240-200)=40 payable by you.
================================

CST paid on out of state purchase gone to you purchase account and its non recoverable tax.

VAT paid on your purchase is recoverable tax and it got adjusted in CST and VAT liability adjustment, and balance only is payable.

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