Vat

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varun (Querist)
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01 February 2012 In case a trading concern supply goods to a company registered in Delhi but having factory in U.P. Should it register itself in Delhi or U.P.
Moreover, if such firm gets registered in Delhi and opens a branch in U.P. and takes the sales tax no. of U.P., can such branch directly purchase from delhi in its own name so as to take advantage of VAT????

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Varun Gupta

CA Sumit agarwal MBA CFA

CA Sumit agarwal MBA CFA (Expert)
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03 February 2012 No Vat Input tax credit is allowed on inter state purchase.

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varun

varun (Querist)
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03 February 2012 Thnx, but that was not my question. My query remains the same and is still unresolved. The query is as follows:-

A firm (partners in Delhi) is planning to supply goods from supplier located in Delhi to a company having registered office in Delhi but having factory in U.P. The following options are available with the firm:-

1. The firm can have its registered office in Delhi. In that case, the supplier shall charge VAT and the firm shall charge CST. Moreover, the firm shall claim VAT refund (excess of VAT over CST), receipt of which is very difficult. The advantage would be that all legal and taxation jurisdiction would be in Delhi.
2. The firm can have its registered office in U.P. The supplier shall charge CST and the firm shall charge VAT. In this case, the firm shall not be required to claim any VAT refund. But, all legal and taxation jurisdiction would be in U.P.
3. The firm can have registered office in Delhi but open branch in U.P. and do direct billing from branch.

Queries

A. The goods shall be deemed to be sold in Delhi or U.P.?? (since co. is having registered office in Delhi)
B. If option 2 is followed, is there an option with firm to have legal and taxation jurisdiction in Delhi?? (It would be beneficial for partners especially when case comes in scrutiny)
C. If option 3 is followed, can U.P. branch show purchase and sale in its own name so that it shall not be required to claim VAT refund??
D. Overall, which of the above options is best for the firm??

With Best Regards
Varun Gupta

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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02 August 2025 This is a classic VAT & CST jurisdiction and registration issue involving inter-state sales and multi-state operations. Here's a detailed answer to each part of your query:

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### Scenario Recap:

* Supplier and registered office in Delhi.
* Customer company registered in Delhi but factory in U.P.
* Firm planning to supply goods to customer with options about registration in Delhi or U.P. or branch in U.P.

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### Answers:

**A. Where shall goods be deemed sold — Delhi or U.P.?**

* **Place of Sale:**
The sale is generally deemed to take place at the place where goods are delivered.
* If goods are delivered to the factory in U.P., **the place of sale will be U.P.**, regardless of where the registered office is.
* The destination state (where goods physically reach) has the right to levy VAT.

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**B. If option 2 (registration in U.P.) is followed, can legal & taxation jurisdiction be in Delhi?**

* No, legal and taxation jurisdiction will generally be where the business is registered and operating.
* If you register in U.P. for VAT purposes, U.P. tax authorities have jurisdiction.
* However, your head office can remain in Delhi for administrative purposes, but **tax matters relating to VAT would be under U.P. jurisdiction**.

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**C. If option 3 (registration in Delhi + branch in U.P.) is followed, can U.P. branch show purchase and sale in its own name to avoid VAT refund claim?**

* **Branch registration:**
A branch in U.P. must be separately registered under U.P. VAT law.
* **Direct billing from branch:**
The U.P. branch can raise invoices in its own name, purchase goods from Delhi, and sell in U.P.
* This way, **it is treated as an independent dealer for VAT**, and you won’t have to deal with VAT refund on inter-state purchases since it’s intra-state supply within U.P. for the branch.
* But keep in mind: the Delhi registered office and U.P. branch will have separate VAT registrations and comply with their respective state VAT rules.

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**D. Which option is best for the firm?**

* **Option 1 (registration in Delhi only):**

* Simpler compliance as all under Delhi jurisdiction.
* But inter-state sales to U.P. factory means CST charged on outward supply and VAT charged on purchase by Delhi office; refund of excess VAT over CST may be difficult.
* **Option 2 (registration in U.P. only):**

* Avoids refund issues as VAT is charged on sales and purchase within U.P.
* But compliance and legal matters under U.P. jurisdiction which may be inconvenient if partners are in Delhi.
* **Option 3 (registration in Delhi + branch in U.P.):**

* Provides flexibility, local registration in both states.
* Branch can handle U.P. sales and purchases, avoiding VAT refund complications.
* Slightly higher compliance burden but operationally efficient and legally clean.

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### **Summary:**

* If your turnover and business volume in U.P. are significant, **Option 3 is usually the best choice** to avoid refund hassles and comply with both states’ VAT laws properly.
* If business in U.P. is minimal, **Option 1** may be simpler.
* **Option 2** can be cumbersome due to jurisdiction but avoids refund problems.

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If you want, I can help you draft a checklist for registrations and tax filings for each option! Would you like that?

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