Sales outside the state - section 4

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Shivani (Querist)

09 June 2014 On 26-4-2011, M/s National Traders received a sales order from Excel Traders, Mumbai for 4 photo copying machines priced at ` 43,000 each. M/s National Traders raised a sales invoice for the said item vide invoice number 012, despatched 2 nos and requested the branch office – National Enterprises to despatch remaining quantity. CST @ 2% was charged while invoicing against C Form. The sale value and CST amount of goods despatched by branch office was reversed on 27-4-2011.

The above is a question given by Tally Solutions in its guidance book and following are the entries they gave:

Entry 1 (Interstate Sale Entry)

Excel Traders 175440

To Interstate Sales 2% 172000

To CST 2% - Interstate Sales 3440

Entry 2 (Reversal of Interstate Sales to Sales Outside the State)

Interstate Sales 2% 86000

To Interstate Sales - Tax Free 86000

Entry 3 (Transferring value of CST to Branch)

CST 2% Interstate Sales 1720

To National Enterprises 1720

My questions are following

I am clear as to the first entry.

But what are they doing in remaining two !!

Thanks

Shivani

shivaniadream @ gmail.com

Vishnu Saboo

Vishnu Saboo (Expert)

10 June 2014 entry no 2 may be for inter branch sale, but entry 3 is not understadable.

Shivani

Shivani (Querist)

11 June 2014 Dear Arun Sir

Please help me on this.

As far as I am concerned National Traders should have nothing to do with the sale made by National Enterprises (its Branch) as the sale made by branch is outside the state of National Traders.

I feel that National Traders should just pass the reversal entry

Interstate Sales 2% 86000
CST 2% Inerstate Sales 1720
To Excel Traders 87120

and when branch makes sales of remaining 2 items to Excel Traders the branch should pass (assuming VAT rate in the state of Branch is 4%)

Excel Traders 89440
To Local Sales 4% 86000
To Output VAT 4% 3440

What is your opinion sir?

Shivani
Local Sales 4%