vat & octroi

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This query is : Resolved

shree (Querist)

16 August 2010 hi......
Example -
If ' 'A'' is manufacturer in maharashtra ( out of Mumbai ) & supply material at Mumbai to our verious customer. 'A' raised excise invoice on it's customer at it's manufacturing centre ( i.e. - basic + excise+ vat + insurance) & after transit at the time of Entry in Mumbai "A" paid Octroi on behalf of Customer (reimbursement ) and deliver the material to customer.
For collection of Octrio amount "A" Raised a commercial invoice ( details of above invoice plus octroi ) & collect the same from customer.
I want to confirm that on above instance whether vat should charges on Octroi ? and if it is charge then what is the invoicing structure at manufacturing level & the at commercial invoice.

thanks

VINOD ARORA

VINOD ARORA (Expert)

16 August 2010 The octroi is a charge at delivery stage. It is supposed to be on the sum charged before delivery of the goods. That is why octroi charges become the part of the sale price and therefore it is liable for VAT.

There may be a different treatment where the seller sells the goods on ‘ex-factory’ basis and where the purchaser has to pay octroi. In such a case the sale is complete at the gate of the factory and the payment of octroi is made for subsequent movement of goods. Therefore VAT will not be payable on such type of octroi, because it is related to the payment after the delivery of the goods.

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