Regarding e-1 sales (sale in transit)

Dear Sir,

Sub :- Clarification regarding E-1 sales.

Example - 1. X (Purchaser) who was staying in Karnataka was palced an order on Y (Seller who was also staying in Karnataka) to supply materials worth Rs.1000/- (i.e. Basic rate of Rs.1000/- and Excise and VAT extra at applicable rates.)

2. Where as Mr. Y (Seller) procurred materials from Mr. Z (Manufacturer / Dealer/Importer) who was staying in other than Karnataka and directly arranged delivery of material to X by making him as consignee.

3. Then Mr. Y raised Tax invoice on Mr. X as bellow along with excise invoice issued by Mr. Z. (Purchaser is Y and consignee is X)

Basic Rate 1000.00

Excise 123.60 (Reimbursement as per Excise invoice issued by Mr.Z)

Vat 14.5% 162.90 (As per purchase order issued by Mr. X)

Total. 1286.50

Questions :- 1) Whether the above said transaction is considered as E-1 sale ?

2) If Yes is it compulsary to mention as E-1 sale on the Tax invocie issued by Mr. Y.

3) Is the VAT charged in Tax invoice is correct or he has to get reimbursement of CST charged by Mr.Z to Mr. Y (Like excise).

4) Whether LR (Lorry receipt) copy issued by Mr.Z is to be certified by Mr. Y ?

5) Is Mr. Y has to raise Tax invoice by clubing all the amount in single line item. (i.e. 1286.50) or he may show as detailed as above.

which is the correct billing format.

6) On what basis a sale is considered / treated as E-1 sales.

Plse advise in the matter.

Thank U.

Ishwar.

From the example cited by you, it is clearly not a E1 Transaction. I say this because VAT has been charged on the sale. Since VAT shown is a levy under the Karnataka VAT Act, the transaction mentioned cannot be construed to be under the Central Sales Tax Act 1956.

Having said that, this was a fit transaction under the CST Act with C/E1 Forms. How ???.....read on….

As you must be aware that the inter-State movement of goods are cases where Central Sales Tax can be made applicable. I your case there is indeed a movement of goods from one state to another.

I have made some modifications (in Bold typeface) in the modus operandi in the example given by you so as to bring it under the ambit of C/E1 Transaction i.e. Sale by transfer of documents for title of goods.

Y shall issue “C” Form to the supplier(Z) against Invoice and get E1 from the supplier(Z). The LR Number should appear on the face of the Invoice.

Lorry Receipt issued by transporter shall be in the name of Y with the destination of X..

Y shall endorse the LR in the name of Z and receive “C” Form from Z.

This transaction shall be shown in Y CST Return as transaction under section 6(2).

3. Then Mr. Y raised Tax invoice on Mr. X as bellow along with excise invoice issued by Mr. Z. (Purchaser is Y and consignee is X)

Basic Rate 1000.00

Excise 123.60 (Reimbursement as per Excise invoice issued by Mr.Z)

Vat 14.5% 162.90 (As per purchase order issued by Mr. X)

Total. 1286.50

Y shall raise a “Retail Invoice” on X as under

“Sale under section 6(2) of the Central Sales Tax Act 1956”

Goods descripttion as in the Supplier Invoice 1400 (Amount is including Markup)

Surgharge 20 (This is the CST charged by Z)