Should vat be paid for reimbursement of spare cost?

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Anwar

21 Points Posted on 15 October 2012

Dear Sir,

I am from Kerala. I run an authorised service center for a cellphone brand. Every month my company service warranty handsets, for which I claim the service charge and spare charge+CST cost from the cell phone company. The spares are purchased interstate from the cellphone company, during which I pay 12.5% CST. When I am reimbursed, I am paid the original purchase price of the spare along with the CST I paid for procuring the spare. Also, not all claims are accepted; and some claims are rejected whereby I lose money both in terms of service charge, and the spare cost

My question is:

1. Do I need to pay VAT on the spare cost reimbursed from the company, though we are not making any profit from the transaction?

2. How should I account for the claims lost, and hence lose of spare?

3. Should I pay VAT for the spares that were used, but claim rejected?

Awaiting you reply.

Thanks and Regards,

Anwar Azad

Replies (2)

dheeraj kumar verma

account execuitive

22 Points Posted on 15 October 2012

someone tell me what is vat rate on agriculture water pipe in the case of dvat

murugan

Accountant

22 Points Posted on 29 October 2012

1. You can take credit of VAT for the Spares purchased within the state only. In your case your are purchased spares form other state , Hence Input VAT credit is not allowed. Input tax on interstate purchase cannot be settoff against the VAT due on your sales of both local aas well as interstate, Therfore you need to pay VAT on the spare cost reimbursed from the company, irrespective of the fact that you are earning profit or not.

2. The total price (Inclusive of the Tax ) is your Cost . You have to arrive landing cost of the spare plus cetain margin before billing the spares

Thanking you

R.Murugan, Pollachi