Currently why do companies open depot in each state

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This query is : Resolved

Sahil (Querist)

31 December 2009 If a company is directly selling interstate. they only have to pay CST and no VAT. CST being only 2%

But in case of stock transfer they avoid CST but pay State VAT at around 12.5% for which they cannot get credit as it is paid in different state than the input state.

So why is it beneficial for companies to open depots in each state.

CA Deepak P. Agrawal

CA Deepak P. Agrawal (Expert)

31 December 2009 HI,
If you consider a company as a whole, it can claim set off in relation to purchase only once. Whether that is taken in for e.g. Maharashtra or Gujrat, it will be revenue neutral.

As regards to opening of depo, it is more for business convinience. It may not be necessary that company has in hand order all the time. So for early deliveries and management they are openings depos in various places.

Sahil

Sahil (Querist)

31 December 2009 I completely agree with Deepak. But i am talking about those depots that are only opened in order to avoid CST.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)

31 December 2009 The main reason for opening up of depot is that the buyers who purchase from the depot can the credit of VAT paid by the company.

Sahil

Sahil (Querist)

31 December 2009 Thanks for your answer Nitin. But if a company is in one state and if it makes a sale in another through a depot there. He charges VAT in the second state. SO how can he get credit for VAT in the second state for the input in the orgin state. I think interstate credit is not allowed in VAT.