E-1 transaction

This query is : Resolved

Mayank Dave (Querist)
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11 January 2011 i(gujarat party) purchase good from daman where 0% tax on item. but tax in gujarat is 5%. now gujarat party sale inter sale to delhi party in transit.

daman consultant say that i can not issue E-I form as such in daman rate is 0%. is daman consultant right or wrong ?

Amit Bajaj

Amit Bajaj (Expert)
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12 January 2011 Daman party can issue E1 form

In a recent case namely Mitsubishi Corp. Ind. Ltd. Vs Value Added Tax officer decided by Delhi High court wherein sighting the observation of the Supreme court in A & G technology case it was argued by the councel for the state that if the first Inter State sales is an exempted sale then the subsequent sales should not get the benefit of Section 6(2) of CST Act even if all the conditions u/s 6(2) are satisfied since the first sales had not suffered tax. The Delhi High Court in this regard observed as under:

“A reading of the said portion of the Supreme Court decision only indicates that where the first sale is taxed, the second sale would be exempted because of the object of avoiding the cascading effect. However, the Supreme Court decision cannot be understood to mean that where the first sale is exempted, the second sale must be taxed even though the conditions under Section 6(2) for exemption stand satisfied.”

Thus even if the first sales was exempted due to exemption on tax available in the state wherefrom the first sale is made the subsequent sales in other state will be exempted if the conditions u/s 6(2) of CST Act are satisfied.

For more on E1 and E2 sales can refer at the following link:

http://amitbajajadvocate.blogspot.com/2010/12/understanding-e1-and-e2-sales-under-cst.html

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