INTERSTATE SALE

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.

Originally posted by : AMIT RAY
	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.

AP unit had to issue invoice to MP unit and LR in favor of self destination MP, endorsed in favor of MP office, and in turn MP office had to endorse the LR in favor of customer at assam "without any CST charged further"

in the process MP had to issue C form to AP for 5 lacs and receive E-1 form,

MP had to issue invoice to assam party on the strength of invoice raised by AP, without adding any tax component, stating "E-1 Sales" and had to receive C form , from assam.

now MP unit have to transfer 5 lacs funds to AP to regularize the accounts. rectify the returns as 45 cr sales / turnover for MP unit and 5 cr for AP, its mere payment consolidation not of sales.

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AMIT RAY

U S Sharma

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