Vat on sales to mumbai

This query is : Resolved

SAJI (Querist)
Follow

10 October 2011
Can anyone help me to clarify my doubt on VAT?

My company is a manufacturer of packed food products in Kerala. For sale of goods to Mumbai what will be the total tax liability chargeable. We are selling our products through a dealer in Mumbai. From the dealer it will moves to the retailer. If we are selling the product at Rs. 100, our calculation on tax liability will be like this.

Selling price =100
CST = 2
Octroi (@5.5%)= 6.6
Dealer price =108.6
Dealer margin = 1.4
Selling price of dealer = 110
VAT @12.5% = 13.5

Cost price to retailer =123.5
Profit to retailer = 1.5
Selling price = 125

Whether the above calculation is a correct one?

Suppose we sell goods to the dealer at free of cost ( one case free for one case purchase), whether free goods is also taxable? Retailer will sell free goods at full price to the customer.

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
Follow

12 October 2011 Mr. Saji,
Some changes are to be made to your calculation of tax in Maharashtra. You have to charge 13.5% VAT on the total cost of goods till it arrives at Mumbai.The total cost including selling price,CST and octroi comes to Rs108.6.on this amount VAT chargeable @13.5% is Rs14.7.After adding dealer's margin of 1.4 the retailers price will be Rs124.7 and the selling price has to be Rs126.2.
The free goods are also taxable at the same rate. Octroi is also leviable.You may save only CST as you are not raising any invoice on the free supply of products.
MJK

SAJI

SAJI (Querist)
Follow

13 October 2011 Dear Sir,

Thank you very much for your expert opinion on the topic.

In my calculation Octroi calculated is wrong instead of 102 I took 120 for the calculation of Octroi. But sir whether I charged octroi on the correct point?

Further whether VAT to charge after adding the margin or before adding the margin.

Regards

Saji joseph

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
Follow

14 October 2011 Mr Saji,
I too did not notice the error you committed in the calculation. Octroi is charged on the total invoice value,but excluding freight(When charged seperately)i.e.Rs102/-.So the octroi levy comes to Rs5.6 and the dealer's price becomes Rs107.6,dealer's margin Rs1.4,selling price of dealer,Rs109.0,VAT @ 12.5% is Rs13.6,cost price to retailer Rs122.6,retailer's margin Rs1.5,VAT charging by retailer on Rs109+1.5=110.5@12.5% at Rs13.8 and retailer's price adds up to 124.3.This should be the correct way,but generally all retailers collect tax on tax also(by ignorance)i.e. they collect 12.5% VAT on Rs124.3,which comes to Rs15.5.It means the consumer pays Rs139.8 which is wrong.
VAT is to be charged after adding the seller's margin.
MJK

SAJI

SAJI (Querist)
Follow

16 October 2011 Thank u sir,
Now its very clear.
regards
saji joseph
joseph.saji4u@gmail.com

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now