A client who is a manufacturer's distributor has been receiving Interstate supplies of a Taxable Commodity.
Pre-GST this commodity was taxed under VAT by both supplier and recipient state.
The manufacturer began GST Invoicing these as Nil Rated under HSN 0801.
Client disputed this and asked them to Invoice under HSN 2008 taxable @ 12%.
The manufacturer refused to accept the 12% HSN.
Client received some NIL rated shipments in 2017-18.
In Aug 2017 Client visited their Sales tax ward and were verbally informed that Buyer cannot alter the HSN of Goods bought when they sell them. So they must sell goods on same HSN as issued by their Manufacturer.
Accordingly they issued Nil rated sale invoices till stocks finished (Feb 2018).
They kept pursuing the matter with their manufacturer in the hope that they will revise Invoices or seek a ruling for rate declaration in origin state.
Client stopped purchasing goods from this manufacturer in Dec 2017.
Now they have approached us seeking advice on what options they have to rectify/remedy the situation.
My questions:
1. Is my client liable to pay penalty?
2. How can they voluntarily pay the shortfall in Tax and Interest and avoid Penalty?
3. How to amend returns?
4. Tax Calculation: Taxable value & Total Invoice value will be the same for Nil Rated goods.
Client's terms to his retailers were "rate inclusive all taxes & delivery costs".
So they cannot recover any additional tax from their buyers.
If Client's Invoice Taxable value was Rs 1000, will they need to pay 12% output tax on Rs 1000/- or can they revise invoice as Rs 1000/- inclusive GST? i.e. Taxable value Rs 892.86 and GST @ 12% Rs 107.14
Please assist.
CAclubindia
