Karnataka vat on internal transfer

The taxability depends on the facts of the case. The following are some of the judgements you can refer to get clarity:

1. In a works contract value of any goods supplied by the contractee to contractor for execution of works contract, cannot be included in the in the taxable turnover of the contractor.Builders Association of India (88 STC 214 (SC).
2.  Where a contractee supplies goods  to the contractor for use in the works contract for a fixed price to be recovered or adjusted in the bill of the contractor, such supply is sale of the contractor. [Rashtriya Ispat Nigam Ltd V/s State of A.P 1966 102 STC 454 (A.P.) / 1989 72 STC 368 (SC)]
3. If the materials are supplied free of cost to be used in the works contract, there will be no sale [ONGC V/s CST U. P. 1996 102 STC 466 (All HC) / 1989 75 STC STC 233 (All HC)
4. Supply of material by contractee to contractor for use in works contract is sale [Cooch Bihar Contractor association V/s State of W.B. 1996 103 STC 477 (SC)

As per section 11 (a) (2) of KVAT Act input credit for fifth schedule goods is not available if such goods are purcahsed and put to use for purposes other than resale or manufacture or any other process of goods for sale. In your case the department is demanding tax on the transaction treating it as sale and hence the restriction under section 11 (a) (2) are not applicable to your case. So in my view you must be entitled to take inpur credit.

we are JCB Dealer in karnataka , so  what form will give for customers  about entry tax , pls suggest to clear this problem they asking form 40 for pay vat , that is enough or other form will require .