Query on Interstate Sales - URGENT!!!

Others 16298 views 3 replies

R.Sankaranarayanan

Indirect Tax Executive

163 Points Joined November 2008

HI ALL!

We are holders of Central Excise Dealer registration, located in Chennai registered under TNVAT and CST statutes.

Our Supplier is in the state of Gujarat and we buy goods from them and sell to our different customers all over India by means of intransit sales (sale by transfer of documents in title).

When our customer places a Purchase Order to us, we places a similar purchase order to our supplier. Suppier raises invoice charging CST @ 2% on our name as buyer and our customer name as Consignee,as the place of delivery of goods are metioned in our PO. We receives the goods from supplier’s factory and delivers to our Customer’s place billing them CST @ 2% as per the PO.

The transportation responsibility is undertaken by us.

Now, in a peculiar case, one of our customers located in Gujarat itself raised a PO on us. As usual, we raised another similar PO to our supplier mentioning the place of delivery as Gujarat itself.

At this point, our supplier charged Gujarat VAT @ 15% (12.5+2.5) saying since the goods are not moving out of Gujarat, CST will not be applicable.

As per the PO from our customer we are charging CST @ 2% in our invoice to Customers.

We don’t have VAT registration in the state of Gujarat. So, the VAT Charged by our supplier cannot be taken as input tax credit for us (I belive so).

Ultimately we have a loss of 13% sales tax (15-2) by this transaction duty to the levy of local VAT by our supplier.

Is there any option for us or for our customer to take credit of this 15% VAT charged by our Supplier?

If so, Kindly advice. This is urgent,

Thanks in advance.

Replies (3)

k n v v s k sri kanth

564 Points Joined January 2009

Well Mr.Sankaranarayanan,

If you are a buyer from that seller from gujarat, and on those goods if you have CST registration you can get them at 2% on the goods and if you want to sell those same goods to the other person / firm / any one situated at Gujarat only then you can charge him 2% if he has CST registration and not acc. to act you need to charge respective tax ( i thnk 4% double of actual tax), but before this you need to bring the stock purchased from that seller from gujarat and need to parcel those goods from your place again to the seller at gujarat nly then you can avoid TAX BURDEN @ 15%.

Regards

chandra shaker

TAX PRACTITIONER

59 Points Joined December 2009

Here in this case you are executing a TRANSIT SALES where the consignee i..e, to whom you are supplying goods against P.O.,coincidently the said consignee is located in the same state ,where from you are purchasing the related goods and supplying ,here in this case it is not compulsory that the related parties should be in three different states ,the supplier/consignor and Receiver /consignee may be in the same state where the consignee should give a statutory form 'C' to the main party to whom P.O. is raised and vice versa the main party i.e who is effecting transit sales should give statutory form ''C'' to the supplier/consignor accordingly the consignor shall give a E1 form to the main buyer to claim exemption of the said sales .

Here exemption is allowed on the said transit sales ,because the goods will not receive/ come to the place of business from the supplier directly ,the goods are sent to the receiver from the consignor with out coming to the place of main buyer .

THE TWO VAT/CST REGISTERED DEALERS OF THE SAME STATE CAN SALE/TRANSFER THE GOODS IN TRANSIT ON ACCOUNT OF MAIN BUYER UPON HIS INSTRUCTIONS WHO IS SITUATED IN OTHER STATE.

G.S.CHANDRA SHAKER
TAX PRACTITIONER_STP
Mobile.No.+91-9395323341/9951038001
Email.Id.chandrashaker7 @ gmail.com
chandrashakerstp @ gmail.com

chandra shaker

TAX PRACTITIONER

59 Points Joined December 2009

DETAILED EXPLANATION OF TRANSIT SALES

Declarations in E-I and E-II form - As per section 6(2) of CST Act, first Inter State sale is taxable. Subsequent sale during movement of goods by transfer of documents is exempt from tax, if the subsequent sale is to Government or a registered dealer. This is subject to condition that such subsequent seller obtains declaration (a) from the selling dealer i.e. from registered dealer from whom goods were purchased. (b) from purchaser a declaration in C form or declaration in D form. The selling dealer has to make declaration in E-I form if it is a first sale and in E-II form if it is a subsequent sale. One example will clarify the requirements. Assume that W despatches goods from Maharastra to any other place i.e with in the state of maharastra or outside the state of maharastra against D.C. and LR Documents/ Transport documents and raises invoice on X in Andhra Pradesh, W charges 2% CST against form ‘c’ and pays the same in Maharastra. During movement of goods, X sells goods to Y in Maharastra or any other places or other states and X ultimately sells goods to Y in Maharastra. Y takes delivery of goods and the ‘movement of goods’ comes to end. Sale from X to Y is by transfer of documents. In this case, W will receive declaration in ‘C’ form from X and will issue declaration in ‘E-I’ form to X. Later, X will issue declaration in ‘E-II’ form to Y and receive declaration in C form from Y.,which will complete the chain. If the chain is broken, CST will be payable again.

NOTE:- If any dealer executes TRANSIT SALES , the needful documentation work should be done to claim exemption of the said transaction Assume that When W delivers any goods to any other dealer, i.e. W who dispatches’ goods to other dealer Y on account or on behalf of X ,then W should narrate the documents in a proper way with regard to Delivery challan and LR Documents or other Transport documents i.e, W should write CONSIGNEE details as follows:-

CONSIGNOR:- CONSIGNOR:-

M/S. W M/S. W

Maharastra Maharastra

CONSIGNEE :- OR BUYER:-

M/S.Y M/S. X.

Maharastra Andhra Pradesh.

ON A/C of M/S. X

Andhra Pradesh. CONSIGNEE:-

M/S.Y

Maharastra

ON A/C of M/S. X

Andhra Pradesh