On replacement

Others 454 views 4 replies

Mathew George ACMA

Finance Manager

71 Points Joined March 2010

Good Afternoon Sir, Myself Mathew, a Cost Accountant, I have some doubts on Sales Tax, I will be greatfull if you could help me. For the last few days i dont have any answer for this. My company is actualliy in to Import of PVC Roofing and Flooring material and Selling to Other States and with in the state. This has been going on for the last few years, now due to some mis management the product is of not good quality and customers are asking for replacement. On this Contrary we have imported a container only for Replacement. Is it necessary that we need to bill it and remit the sales tax . What we are doing now is putting the same in lowest cost that is some what equal to purchase cost and billing it.And remitting the sales tax. The problem is for interstate. Most likely the replacement is done in North India only. The trucks will not accept the material without invoice, e- declaration and delivery note. The problem is no revenue is generated already we are having problems with funds. We are Under the Kerala Sales Tax - (KVAT)

Replies (4)

CMA Poornima Madhava

CMA

13117 Points Joined May 2009

Since the replacement does not carry any saleable value (as it is not a fresh sale), VAT may not be applicable. /forum/replacement-of-goods-5702.asp

U can use delivery challan mentioning it as free replacement (instead of invoice) and also Kerala specific delivery note (if any prescribed by VAT authority). That should solve the problem i think.

Mathew George ACMA

Finance Manager

71 Points Joined March 2010

Dear madam

Actually we are importing, we cant take it from Customs without paying ther Customs Duty, and if we want to take SAD we need to bill it. so if we are just using the Delivery Challan we cant calim the 4% SAD from customs.

Another question which we arise is how to account the same in tally , we need to show that much less stock.

Originally posted by : Poornima Madhava

Since the replacement does not carry any saleable value (as it is not a fresh sale), VAT may not be applicable. /forum/replacement-of-goods-5702.asp

U can use delivery challan mentioning it as free replacement (instead of invoice) and also Kerala specific delivery note (if any prescribed by VAT authority). That should solve the problem i think.

CMA Poornima Madhava

CMA

13117 Points Joined May 2009

Yeah...but ur query was whether to bill with VAT or not. So i answered from that prespective only. Actually if u bill it as fresh sale (even with little margin on cost), u might get SAD refund, but in spite of that, will it not increase ur profit unnecessarily and hence tax liability?..also how wil u handle debtors balance as u would not realize them?.....on d other hand, if u just give it as free replacement, ur cost goes up (no SAD credit of course) and results in less profit and hence less tax liability. So which option would u be considering?..I think u need to consider the financial results and then decide.

If i have missed some important points to consider, pls let me know...