Consignment sales query

Others 1725 views 3 replies

Pratik

Accountant

48 Points Joined July 2009

Hi, I'm from Tamilnadu state. I have few doubts on Consignment Sale concept. Please Clarify.

My Understanding:

Consignment sale is trading arrangement in which the consignor sends goods to the consignee for selling them on behalf his (consignor) behalf. The consignee gets commission for providing such arrangements to the consignor. Here the title owner of goods is the consignor.

Lets asssume A is the consignor co. & B is the Consignee Co.

A will send goods to B as Consignment Sales against FORM F. B will sell the goods to various dealers at the rates prescribed by the A. B will also charge Sales Tax on such goods sold and will deposit the collected sales tax with states' sales tax revenue department.

Questions (where Turnover is above 1 Crore):

01. Since B is raising Invoice on behalf of the A, collecting taxes and depositing it, Is B liable to VAT Audit under TNVAT?

02. When the purchase and sale belongs to the consignor, is B's books liable to Tax Audit?

03. When the purchase and sale belongs to the consignor, do B need to file the trading account details in Income Tax's ITR Return?

Replies (3)

Pratik

Accountant

48 Points Joined July 2009

Are my questions are not clear or appropriate? Waiting for replies...

Originally posted by : Pratik
	Hi, I'm from Tamilnadu state. I have few doubts on Consignment Sale concept. Please Clarify. My Understanding: Consignment sale is trading arrangement in which the consignor sends goods to the consignee for selling them on behalf his (consignor) behalf. The consignee gets commission for providing such arrangements to the consignor. Here the title owner of goods is the consignor. Lets asssume A is the consignor co. & B is the Consignee Co. A will send goods to B as Consignment Sales against FORM F. B will sell the goods to various dealers at the rates prescribed by the A. B will also charge Sales Tax on such goods sold and will deposit the collected sales tax with states' sales tax revenue department. Questions (where Turnover is above 1 Crore): 01. Since B is raising Invoice on behalf of the A, collecting taxes and depositing it, Is B liable to VAT Audit under TNVAT? 02. When the purchase and sale belongs to the consignor, is B's books liable to Tax Audit? 03. When the purchase and sale belongs to the consignor, do B need to file the trading account details in Income Tax's ITR Return?

CA HAYEDAR SHAIKH

Practice

627 Points Joined June 2014

Dear Pratik,

Go through the following

If the property in the goods or all significant risks and rewards of ownership of goods belongs to the commission agent or consignee immediately before the transfer by him to a third party, then the sales price received / receivable by the commission agent or consignee shall form part of his sales / turnover – Audit is applicable.
If the property in the goods or all significant risks and rewards of ownership in the goods continue to remain with the principal (consignor) immediately before the transfer by him, (the commission agent or consignee) to a third party, then the sales price received / receivable by the commission agent or consignee shall not form part of the sales / turnover of the commission agent or consignee. The sales price received / receivable by him shall form part of the sales / turnover of the principal (consignor) – Audit is not applicable.

CA HAYEDAR SHAIKH

Practice

627 Points Joined June 2014

Dear Pratik,

Go through the following

If the property in the goods or all significant risks and rewards of ownership of goods belongs to the commission agent or consignee immediately before the transfer by him to a third party, then the sales price received / receivable by the commission agent or consignee shall form part of his sales / turnover – Audit is applicable.
If the property in the goods or all significant risks and rewards of ownership in the goods continue to remain with the principal (consignor) immediately before the transfer by him, (the commission agent or consignee) to a third party, then the sales price received / receivable by the commission agent or consignee shall not form part of the sales / turnover of the commission agent or consignee. The sales price received / receivable by him shall form part of the sales / turnover of the principal (consignor) – Audit is not applicable.