Please advise on the queries based on the example :
Example : Company X has two units , one unit at A.P. and another at M.P. Company got an order of Rs. 50 Crores from Company Y at Assam.Company X has allocated the entire order tp M.P. unit. In turn, M.P. unit advised A.P. unit to manufacture and send finished materials valued Rs. 5 crore directly to customer of Assam to reduce freight charges.
The sale pertains to Inter state sale. M.P.unit raised tax invoice of Rs. 45 cr. and added CST @ 2% against "C" Form accordingly. A.P. unit directly sent goods amounting to Rs. 5 Cr. and raise Tax Invoice and added CST @ 2% against "C" Form. Both the units paid CST in their own jurisdiction.But the M.P. unit gets the full payment as the entire contract was awarded to them. A.P. unit actually shows the sale as inter unit sale in accounts and sales as per CST in Tax Return. M.P. unit shows Rs. 50 crore sale as turnover and shows Rs. 45 Cr. sale as CST sale in CST Return.
Please give your comment stating the concerned Section of CST on the above issue. If you consider that the units are doing something wrong please advise what to do actually to follow the Act.
CAclubindia
