Kandla SEZ

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This query is : Resolved

CA Ashok Prasad (Querist)

16 February 2011 HI,

My client has an unit at KANDLA SEZ, a manufacturing concern.

It has some purchases on which it has received discount on payment. i mean to say that a discount was offered if payment was made within certain days. company has paid within that period.

Query 1.
will above reduced amount be taxed? remember my client's income is exempt since it is operating in SEZ.

Query 2.
It has also entered for DTA sales. accordingly income generating in proportion to export will be exempt. rest be taxed. i would like to know whether company needs to comply the provisions of advance tax, given that DTA sales are there?

Thanks in advance?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

16 February 2011 Query 1.

If the company is getting discount on purchases, profit will certainly increase by this amount. I think . the query requires modification.

.
Since the discount received is a trade discount you have to credit P& L A/c by the amount of discount and such amount of profit will increase.
.
The same will be taxed in the manner narrated by yourself in query 2.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

16 February 2011 Query 2:
i would like to know whether company needs to comply the provisions of advance tax, given that DTA sales are there?

Ans > Yes. To the extent of tax leviable on
taxable profits, the company has to pay advance tax.

Its export profits only, are exempt. It's domestic sales profits are taxable.

CA Ashok Prasad

CA Ashok Prasad (Querist)

16 February 2011 Thank you!

But regarding 1st query, would it be ok if purchases are shown net of discounts. thereby profit will increase, but won't be taxed as it is operating SEZ.

myself believe that the kind of discount available is not offered in regard to the high quantity purchase order, nor price values, say you achieve certain level of purchase. All i want convey it is not resulting during commercial or trading activities of buying selling. it resulting due to fast payment. In way it is costing the unit in form of interest for early payment(in fact essentially it is compensation). although it nomenclature given is to be discount.

so it would not be wise to net off the purchase.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

19 February 2011 That's why in my reply, I have mentioned that it should be Credited to Profit & Loss A/c.
However, take it in the best suitable manner, it is not going to have any impact on tax calculation.

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