Cst

My Client(Andhra Pradesh) is purchasing cotton from kerala,Both my client and seller are Registered dealers of vat

seller issues invoice by imposing CST of 5% instead of 2%.My client gives reason for that as

seller wish to use vat paid by him as credit against this sale, for that purpose he collects vat rate instead of cst rate

is it possible to do so?

i think seller do this for the following reason

he paid a vat(5%) of rs 10000(kerala),he is just dealing with interstate sales.he make a sale of rs 500000 to a dealer in ap

in which cst of 10000 should be payable for which no credit shall be available.so he is liable to pay cst of rs 10000

he thought if i collect cst @ 5%,he can set off vat paid of rs 10000 as input tax credit, no furthur liability to pay cst exists

is this treatment is correct? if not possible what should our client do?

wish an early reply

thanks in advance

Replies (1)

CST charged by the seller in his invoice is not eligible for set off though it is 5% instead of 2%. But Liability of issuing C Form will not be at buyer as he has allready paid full tax.

The contention of the seller behind charging CST 5% is also not correct. He may claim Vat refund remain utilized at the end of financial year. There is no need to collect full tax from the buyer.

 

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