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Sales tax doubts

Abubakker (Others) (60 Points)

21 June 2014

Hello Sir,

I'm from Tamil Nadui statrted new business of Leather Footwear, I buy Shoes from my local suppliers in thso format (i.e)

500 pairs X 400 Rs = 200,000

5% VAT = 10,000 Total: 10,000

Now i sell this goods to gurgaon (or) Delhi (or) Banglore

500 pairs X 450Rs = 225,000

2% Tax against C Form = 4500

`My question is

1) Is this right format to do business..?

2) Is 3% will return to me what i purhcased in local?

3) Now My profit is 25,000 (in that i have lot of expenses like i have to pay my office rent, office boy, many more but for this is recipt enough to sent for Income tax..?

Waiting for your reply

It would be very help full if some one gives me some idea for starter business.

Thanks

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9 Replies

ROSHAN PAUL JOSEPH (CA Final student) (311 Points)
Replied 21 June 2014

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.

1 Like

Abubakker (Others) (60 Points)
Replied 21 June 2014

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

ROSHAN PAUL JOSEPH (CA Final student) (311 Points)
Replied 21 June 2014

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

Abubakker (Others) (60 Points)
Replied 21 June 2014

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

ROSHAN PAUL JOSEPH (CA Final student) (311 Points)
Replied 21 June 2014

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

CA Ronak Doshi ( ) (234 Points)
Replied 23 June 2014

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,

2 Like

ROSHAN PAUL JOSEPH (CA Final student) (311 Points)
Replied 23 June 2014

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

sorry for the incorrect information.

hari prakash (CA Business) (21 Points)
Replied 09 July 2015

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

SENTHILKUMAR (auditing work and book prepar etc. ) (21 Points)
Replied 17 September 2015

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.