Sales tax doubts

As your products are sold outside the state of purchase, you cant avail Input Tax credit.

Sales        : 225,000        225,000

Less:

Purchase  : 200,000         200,000

VAT          :  10,000            1,250   [ 225,000 * 5% - 200,000 * 5%]

CST          :    4,500               -

-----------------------------------------------------

GROSS PROFIT : 10,500    23,750

If you sell the same product at same rate in the same state of purchase, your Gross Profit will be 23,750 as illustrated above

But in your case, the Gross Profit is only 10,500

VAT and CST will be an expense in your case of business, neither you get refund nor Tax Credit.

Thank you very much my friend @  ROSHAN PAUL JOSEPH
 

1) Can you tell me any other way so that i can save 14,500..? Any other format for my type of business?

Waiting for your reply

Thanks for your quick reply

I dont know any way to save this 14,500 in this case.

Thanks For Your Reply

Now i have two doubts

1) Is any other scenrio for me for my business to pay less tax?

2) What is sales tax return and how its applys to my business?

3) What is ITC how it applys to my business?

Thanks

1. I think no. And if there is any such methods I am not aware about it.

2. Sales Tax return is the statement declaring details of :

- Tax paid on purchases,

- Tax collected on Sales

- Tax remitted to Govt. and such other details

3. ITC means Input Tax Credit.

If you are doing business in TN only

Sales : 225,000  ---- tax on sales @ 5% : 225000 * 5% =  11250 (Total sales incl. of tax 236250)

purch : 200,000  ---- tax on purch @ 5% : 200000 * 5 % = 10000 (Total purch incl. of tax 210000)

so because of ITC you have to remit only 11250 - 10000 = 1250 to the Govt

sorry i made some calculation mistake on first message

Hi,

As far as my knowledge, since you are Purchasing from within state i.e VAT Purchases and Selling Inter State i.e CST Sales, you will be eligible for Input Tax Credit.

As CST on Sales can be set-off against VAT on Puchases (Rs. 4,500 can be set-off against Rs. 10,000) and excess i.e Rs. 5500 (10000 - 4500) will be available to be carried forward for next period. However, Purchases from inter state cannot be set-off against any liability.

And 3% which you are paying is returning back to you in terms of refund claim or set-off against your future CST laibility.

And this is the Profitable way of doing your business, as you save 3% which was otherwise payable to you in case of sales within state( 5% VAT on SALES within State) and you would have to pay extra Rs. 1,250/- (2,25,000 * 5% - 2,00,000 * 5%).

So at the end your Profit is not jus Rs. 25000, but additional Rs. 5,500 which you can set-off against next period CST Payable or you can claim as Refund depending on the Rules of State concerned.

Hope this would have helped you.

Regards,

my concept about CST was wrong...thanks for correcting it...

sorry for the incorrect information.

Respected sir 

  i am from chennai i used to manufacture the machinery (iron based). I am Selling it to Telangana State .as CST Applicable.The Party is requesting to deliver the material at kerala .

 Please suggest me how to bill and transit Pass Procedure 

Thanks 

Regards

Prem Hari Prakash

Good morning,

We have working in tamilnadu meenacthi& co madurai,  my doubt is we have purchase machinery for office use purchase in banglore invoice Creaded CST 2% agains Form C.  But That machine is used in only office purpose then how pass entry and Sale tax purpose.