Cst - mobile phones

Mahavat 8386 views 6 replies

Rajesh

Mgr

31 Points Joined May 2012

Hello,

My company is registered in Mumbai and I deal in used mobile phones and buy from end users and sell to end users. Right now I don't pay VAT because my business is small. Next year I will cross the threshold and will need to start paying VAT. My question is how I can minimize the VAT I pay.

1) My understanding is that since I buy from end-user (a non-registered VAT dealer) I don't get any input credit and so need to pay VAT on the entire sale amount when I sell. Is that correct?

2) Maharashtra has 12.5% VAT for mobiles but states like Karnataka and Haryana have 5% VAT rate. Is there any state with lower than 5% VAT rate?

3) What requirements do I need to fulfill to be able to bill from a lower-VAT state like Karnataka? i.e. if the buyer, seller, and goods is located is Maharashtra, is it possible to bill from Karnataka and thereby pay the 5% Karnataka VAT rate and not the Maharashtra 12.5% VAT rate.

Thank you in advance!

Rajesh

Replies (6)

Akash Jain

CA Final Student

261 Points Joined August 2010

Dear Rajesh,

The response to your queries are as follows.

1)If you don't get any input credit you can opt for Composite Scheme as that would be benefical for you.

2)VAT is a State Tax and that varies from state to state and 5% is the lowest VAT rate on mobile phones in India.

3)Not possible to raise your bills from Karnataka as place of bussiness in Maharastra.

Regards.

Mihir Doshi

B.Com CA CS LLB

2187 Points Joined July 2008

Agree with Mr. Akash, Also you need to pay CST if your sale is interstate Sale.

Rajesh

Mgr

31 Points Joined May 2012

1) My understanding is that composite schemes have a upper limit on sales. I expect my sales to be in the Rs 2 cr - 3 cr range and therefore i assume i will not qualify under that scheme.

2) Thanks for the confirmation

3) What would need to happen for me to be able to bill from a state like karnatake where vat is 5%? i.e. Can i open a registered office there and bill at 5%? Or do i need to ship the goods there and only then will the 5% cst be applicable.

Thanks!!!

Akash Jain

CA Final Student

261 Points Joined August 2010

1)As per your reponse ur sales limit going up you are right u do not qualify for composite scheme.

3) If you open ur office and incurr such capital expense just to save your some amount of VAT/CST thats not going to be fruitful as it looks u need to sell in maharastra and your paper work will also increase .

Rajesh

Mgr

31 Points Joined May 2012

Thanks for #1 and #2

Since the difference in VAT rate between Karnataka and Maharashtra is 7.5% (5% Vs 12.5), then 2 cr x 7.5% = 15 lacs [since I have to pay the full VAT rate]

I can easily open an office in Karnataka. But the question is does the inventory/mobiles need to be there? Or can I bill from Karnataka with a registered office with the inventory in Maharashtra itself.

Thanks!