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Vat itc

This query is : Resolved 
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(Querist)
26 September 2012 I have a query regarding Vat ITC which came up from a practical live example and is as follows:

A is a retail registered dealer who buys garments from B a fashion designer(unregistered dealer).According the contract between A and B, A will pay for the garments only if he manages to sell the garment to the final consumer.B agrees to sell the garments @ Rs 225 each to A.
A manages to sell one garment and pays only Rs 200 to B for it. i.e he charges B 12.5% Vat, why is it so???? Is he allowed to do so???
Since B is not charging vat to A why is A deducting the Vat amount from B's selling price???
Is A allowed to do so???
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Nitesh Parmar

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Nitesh Parmar (Expert)
27 September 2012 A can do so but on further sell to other party input will not be available to A.
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renuka Mirji

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renuka Mirji (Querist)
27 September 2012 My query then would be that, On what grounds is A allowed to do so???
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