Consignment purchase after introduction of VAT

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Suresh (Querist)
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16 January 2009 Sir,
Iam a trader who buys in tamilnadu and sell in other states. Now, if i buy outright, i suffer 4% VAT but on sales i collect only 2%CST. This way i stand to loose 2% where as often the margin i get is only 3%. What i intended to do is to act as commssion agent buy goods on consingment purchase and do a CST sale. Tax so collected will paid by me every month ans i shall give sale Pattial and Tax paid certificate to my principal.This way i will save not suffer 4% VAT and save 2% on tax.
The problem is many auditors are saying that this mode (Consignment Purchase)of business is not allowed after introduction of VAT. Kindly clarify if the auditors are correct.

C A GROUP COACHING

C A GROUP COACHING (Expert)
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17 January 2009 CHECK YOURSELF PROPERLY WITH A LOCAL CA THERE, COZ THE LOCAL VAT 4% WHICH YOU PAY
ON YOUR PURCHASE IS REFUNDABLE TO YOU AS iNPUT CREDIT & YUO HAVE TO PAY ONLY CST @ 2%, WHICH ALSO YOU NEED NOT PAY BUT ADJUST THE PAYABLE AGAINST THE INPUR CREDIT.
INCASE YOU REQUIRE ANY FURTHER HELP

CHANDRAKANT AMBANI
BOMBAY
9819408963
9821240674

Suresh

Suresh (Querist)
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17 January 2009 Hello Mr.Chandrakant,
Thank you very much for your reply. My contention is that If Iam buying a materila for Rs.4000/- plus VAT, total cost works out to Rs.4160/- including tax. Now if i sell the material at Rs.4200/- plus CST, this works out to Rs.4284/-. In this transaction i can claim input credit only to the tune of Rs.84/-(CST). But the difference between VAT and CST is Rs.116(Rs.160-Rs.84= Rs.76/-)which ultimately adds up to my cost.My margin works out to Rs.124. If iam to get material on consignment on the same rate of Rs.4000/- and sell at Rs.4200/- plus CST, my margin will improve to Rs.200/- and tax which is collocted will be paid every month.
Kindly clarify if iam right in my opinion.Also clarify my original query pertaining to status(legal or illegal) of consignment agent after introduction of VAT.