53 summary on vat cst and wct

Maharashtra Value Added Tax Act, 2002

Index -

Sr. No. Particulars Page No.1 Notes on VAT 1 to 32 Examples on VAT 4 to 6

3Notes on Deemed Sale -

7 to 9→ Works Contract Tax→ Lease Transaction

4 Examples on Works Contract Tax 10 to 115 Notes on Composition Scheme 12 to 136 Notes on CST 14 to 157 Examples on CST 168 Notes on CST Forms 179 Notes on Sale in Transit 18 to 23

10 Notes on VAT Audit 2411 Examples on VAT Audit 25 to 26


What is VAT -

i.e. sale of goods within the state.Since, it is imposed only on the amount of value addition made, it is known as Tax on Value Addedor Value Added Tax. This is done by providing set off of tax paid on purchase against the tax payableon sales.

Cascading effect means imposition of tax on tax. ( Example 2 ).

As per Entry 54 in List II ( State List ) of Schedule VII to Costitution of India, State are empowered to levy Tax on Sale or Purchase of goods. therefore there is VAT Act or Law for each state separately.Likewise, there is Maharashtra Value Added Tax, 2002 which governs in Maharashtra State and which is applicable from from 1st April,2005 and extends to whole of Maharashtra State.

Some of the important definition -

What is the meaning of Goods -

actionable claims, money, stocks, share, lottery, tickets, grass, trees, including property in such goods attached to or forming part of the land which are agreed to be severed before sale or contract.

What is the meaning of Sale -

Following Transaction not regarded as sale -

It is a contract of labour and not a contract of sale.Even if, Job work is done under a works contract, it will not liable to VAT so long as there is no transfer of property in goods in execution of such works contract.

What is the meaning of Sale Price - According to Section 2(25), Sales price means the amount of valuable consideration paid or payable to a dealer fro any sale madeincluding any sum charged for anything done by the seller in respect of goods at the time of or before delivery therefore other than cost of insurance in transit and installation, if, such cost is separately charges. ( Example 7 ).as per explanation II to section 2(25), sale price does not include tax paid or payable to seller in respect of such sale.

VAT is a form of sales tax i.e. it is a tax on the sale of goods. It is imposed on intra state sale

Therefore, VAT is a multi point sale tax collected on the amount of Value addition at each stage.( Example - 1 )

Unlike, Earlier Sales Tax law, VAT prevents cascading effect of taxation by providing input tax credit / set off tax paid at earlier stage.

As per Section 12 of MVAT Act,2002, goods means every kind of movable property not being newspaper,

Sale means transfer of property in goods by one person to another for Cash or deferred payment.

1) Gift - No price is charged.2) Exchange / Barter - Consideration is not in monetory terms.3) Branch Transfer - There is no transfer of property.4) Job Work / Processing - In this case, goods are returned to owner after such job work is over.

What is the meaning of turnover of Sale - According to Section 2(33), it means aggregate of sale price received or receivable by a dealer in respectof sale of goods during a period after deducting a amount of, Sale price, if any, refunded in respect of goods returned within prescribed time. ( r.w. rule 3 ).

Rate of VAT - Like, Income Tax, in which Income is divided in Five heads, Under VAT system goods are divided into fiveSchedules. ( Example 3 ).

Which State Govt. has right to collect Tax on Sale of goods - 1) According to VAT provisions, State in which Delivery of goods terminates i.e. transfer right of property in goods has taken place, has right to collect tax on such sales. Therefore, Principle place of businessis not important. ( Example 4 ).

Input Tax Credit / Set off and Output Tax -

→ of any goods ( including raw materials, capital goods i.e. Plant, Machinery ect., goods intended for resale, or other inputs.→ made in the course of business.→ from registered dealer within the state.

the course of his business.

Scope of Input Tax Credit ( ITC ) - 1) It is allowed only to a registered dealer.2) The purchasing dealer may be trader or manufacturer.3) It is allowed only of the VAT paid/payable on intra state purchases. In other words, CST paid onpurchases made from outside the state is not allowed as ITC under VAT system. ( Example 5 ).

Eligible Purchses for availing input tax credit - VAT paid can be claimes as ITC, which are purchased for one or more of the following purposes - 1) for sale / resale within the state.2) for inter state sale.3) to be used as, packing material of goods, which are intended for sale in intra or inter state sale, export.4) to be used as capital goods required for the purpose of Mfg. or resale of taxable goods, with certainexception.5) It is allowed only if the purchase are supported by valid invoice.

However, in the following cases no ITC is allowed - 1) Purchase from unregistered dealer.2) Inter State purchase. ( Example 5 ).

1) Input Tax Credit - Means Tax paid or payable by a dealer of a state on purchase -

2) Output Tax - Means tax charges or chargeable by a registered dealer on sale of goods made by him in Exam

ple

1

3) Purchase of goods for use of Mfg. of exempted goods.4) Purchase of goods used for personal use or for own consumption.5) Purchase of goods for sent outside state, as branch transfer with certain exceptions. ( Example 6 ).

Maharashtra Value Added Tax Rules, 2005 -

There are around 90 Rules in MVAT Rules,2005. Some of the important rules are as follows -

from the date of purchase or as the case amy be the sale.

after 1/04/05.

Rule 53 - Reduction in set off - → Purchase of goods for sent outside state, as branch transfer ( Example 6 ).→ Purchases of Office Equipment, Furniture ect., then, ITC is allowed only after reduction in set off @ 3%.Treatment is same as per Example 6.However, Plant and Machinery purchased for production of taxable goods, then, full ITC is allowed i.e. inthis case there is no require to reduction in ITC.→ If, in the year, Gross sale is less than 50% of Gross receipts, then, ITC is allowed only if the sale is madewithin 6 months of corresponding purchases.According to Rule 53(6), Gross receipts means receipts from all activities including business activities, carried out in the state.→ If, there is discontinued business and stock is not transfer or sale, then, ITC on such purchase will notbe allowed.→ If, the goods are used under Works contract under compostion scheme, then, there is a reduction of ITC @ 36% and balance 64% of ITC will be allowed as set off.

Rule 54 - Non admissibility on ITC on Purchases - → Purchase of motor vehicle ( othe then goods vehicle ), which is capital asset unless dealer engaged in the business of transferring of the right to use for any purpose.→ any purchase of consumables.

Rule 77 r.w. Section 86 - Tax Invoice - For Eligibility of ITC, The Tax Invoice shall contain the following particulars - a) The word Tax Invoice in bold letters at top or at prominent place.b) The name, address or TIN no. of the selling dealer as well as purchasing dealer.c) Serial number and date of issue Invoice.d) Description of goods with Quantity, price.e) Tax Amount shall be shown separately.f) Signed by selling dealer or any person authorised by dealer.g) Declaration which state that, dealer is registered under MVAT Act,2002.

Rule 88 - Rate of Interest -

Rule 3 - Period of Goods Returned - The period of goods returned u/s 2(32) and 2(33) shall be six months

Rule 52 - Eligibility of ITC on Purchases - Claimant dealer is elogoble for ITC paid on Purchase made on or

The Rate of Interest u/s 30 ( 2 ) i.e. for late payment shall be levy @ 1.25% of the amount of tax, for each month or for part thereof.

Exam

ple

1


Examples - 1) Concept of VAT - Assume that Rate of VAT is 4%.

Particulars Manufacture Whole Seller RetailerPurchase price 100 250 450

Sale Price 250 450 550

10 18 22

4 10 18

Net VAT Liability 6 8 4

Under VAT system, only the Value addition suffers tax.The portion of the value of goods, which has alreadysuffered tax, is not taxed again.This is done by providing set off of tax paid on purchase against the tax payableon sales.

2) How VAT prevents cascading effect of taxation -

Particulars Earlier Law Under VATManufacture -

Raw Material 1000 1000Labour 500 500Overhead 500 500Cost 2000 2000Profit @ 20% 400 400Sale Price 2400 2400Tax @ 12.5% 300 300Cost to Wholeseller 2700 2400

Wholeseller - Cost 2700 2400Profit @ 20% 540 480Sale Price 3240 2880Add - Tax @ 12.5% 405 360Cost to Retailer 3645 2880

Gross VAT Liability /Output Tax

Input TAX Credit / Set off

Retailer - Cost 3645 2880Profit @ 20% 729 576Sale Price 4374 3456Add - Tax @ 12.5% 546.75 432Price to Consumer 4921 3888

Govt. Revenue 1252 432

Benefits of VAT - 1) Increased in demand - Under Earlier Sales Tax Act price to consumer reaches to Rs. 4,921, althoughMfg. cost remains the same, whereas under VAT system price to consumer is only Rs. 3,888.Thus, VAT leads to reduction in price, which leads to increased in demand, production andalso creates more employment. This is one of the best advantages of VAT system.2) Remove Cascading efffect - Under Earlier Sales Tax Act price reached to Rs. 4,921 due to cascading effect, which is removed by VAT system, as, under VAT system VAT paid is not considered as cost.3) Non - Evasion of Tax - Although, under earlier system, Govt. gets higher amount of sales tax, as shown above, which leads to Evasion of Tax.

3) Rate of VAT - Sec. 5 and 6 of MVAT Act,2002 - Schedule Rate ( % ) Description

I 0 Basic Necessity goods, such as, Rice, Wheat, Milk, Bread.II 1 Precious Stones, Bullions, Gold and Silver ornaments.III 5 Industrial Inputs, Raw Materials, Packing Materials.IV 20 Wines, Liquor.V 12.5 All othe goods, which are not falling in Schedules I to IV above.

4) Which State Govt. has right to collect Tax on Sale of goods - I - Suppose that, Mr. A of Maharashtra sell goods to Mr. B of Gujrat and Mr. B has takendelivery in maharashtra only, then, in the given case MVAT will be levy., because,transaction palce in Maharashtra and also Transfer of property also made in Maharashtra State only.

II - Suppose in the above case, if Mr. A of Maharashtra Sell goods to Mr. of Gujrat, and goods sentby road transport, then, delivery is taken palce out state and also transaction of sale completedin Gujrat state. Therefore, in this case, Maharashtra State can not levy MVAT and instead CST willbe levy which is collected by Central Government.

5) Logic behind not allowing credit of CST - Sales tax is a source of revenue for each state. CST is collected by the appropriate state on behalfof Central Govt., from which goods moved. Thus, if a dealer in rajasthan makes inter state sale to dealer

of maharashtra, the CST on such sale will collected by the state of rajasthan. If, the credit of such CST is allowed to the dealer of Maharashtra against VAT payable to the state of Maharashtra, then, the revenue of the Maharashtra state will get reduced. Hence, the credit of CST is not allowed.

6) Purchase of goods for sent outside state, as branch transfer - Inter State branch transfer do not involve sale i.e. not subject to tax. however, it involves reduction in set off of ITC on intra state purchases, which dependsupon the state policy. According to MVAT rule 53, there is a reduction of Set off @ 2%.

Suppose - Mr. X of Maharashtra purchases goods worth Rs. 5,00,000 ( VAT 12.5% ) from Maharashtra and transfer the same to his branch at gujrat. In this case, Gross ITC is Rs. 62,500 ( 5,00,000*12.5% ),but, eligible ITC is Rs. 52,500 ( 5,00,000*10.5% ).

7) Determination of Sale Price -

Particulars AmountAmount paid or payable for sale of

√goods

√duty ( excl. sales tax )

√done in respect of sale of goods( e.g. Packing Material )

( √ )time of sale and evident from invoice

( √ )Installation, if, charges separatelySale price liable to Sales Tax √

Add - Any statutory levy like excise

Add - Any sum charged for anything

Less - Cash or trade discount at the

Less - Cost of Insurance in transit or


Deemed Sales -

Difference of Normal Sale and Deemed Sale - In Normal Sale there is transfer of property in goods. The goods remain the same before and after the delivery of goods. However, in case of deemed sale, such as, works contract,goods before delivery and after execution of works contract are different. E.g., at the site of construction of building, before the construction ( works contract ) commences, the goods like cement, steel, sand are lying, but, after the construction, building comes into existence. This is the basic difference between Normal Sale or Deemed Sale.

As per Artcile 366(29A) of the constitution of India, sale includes,a) A transfer of property in goods ( whether as goods or in some other form)

c) A transfer of the right to use any goods for any purpose ( whether or not for a specified period ) for cash, deferred payment or other valuable consideration ( i.e.

Works Contract -

assembling, construction, building, altering, manufacturing, processing, erection, installation, fitting out, improvement, repair or commissioning of any movable or immovable property.

As there is no separate act governing works contract transactions, all such transactions are taxable as deemed sale under the MVAT Act. The rate of tax on goods which are used in the execution of works contract, shall remain same as prescribed in the schedules of respective goods i.e. rate specify in the Sec. 5 and 6 of MVAT Act,2002.Howevwer, sale price of such goodshas may be determined in accordance with theprovisions contained in Rule 58 of MVAT Rules,2005.

Basics of Works Contract - 1) Works contract means a contract to execute a job or to undertake an activity on behalf of a principle.2) There are two parties invloved, one is contractor who accept the job and another party isPrinciple who awards the job.3) Property in goods finally passes to the principle.4) If, the passeing of property is incidental and contract is for rendering service only, transaction is not taxable under works contract.

whether there is a works contract or not -

and services. Where the " Contract for sale " is divisible from " Contract for services ", then, the " Contract for sale is separately charges to VAT and the " Contract for services "

involved in the execution of a works contract.b) A delivery of goods on hire purchase or any system of payment by installments.

Lease of goods ).

Definition - " Works contract means a contract for carrying out any work which includes

Scope of Works Contract - The following factors are to be considered while deciding

a) Contract must be composite - A works contract is a composite works contract for sale

will be liable to Service Tax. Taxability under " Works Contract " arises only in the case of " Composite contract ",where " Sale " element and " Service" element cannot be segregated.

Where there are no goods involved, there cannot be any tax liability under VAT.

or in some other form ). In some other form, is intended to mean goods sold in form of immovable property such as property in goods like bricks, tiles etc. passed during construction of building.

pass during the execution of the works contract, not before or after of the execution of the works contract. Thus, outright sale of already constructed immovable property cannot be subjected to VAT under " Works contract ", as there is no transfer of property in the course of execution of building, the transfer took palce after construction.

Taxable event in case of Works Contract - The Taxable event would be the transfer of property in goods which takes place during the execution of works contract.The goods transferred or delivered at site of the contractee, will not liable to tax under works contract, but, when such goods are used in the execution of work contract, taxabilityarises.In other words, in case of execution of works contract, transfer of property in goods takesplace not before or after, but, during the course of execution.Tax payable is on the value of goods transferred during the execution of works contract.

Determination of Sale Price for Works Contract - There are two mathods for determining the sale price for works contract, as follows - 1) Applying normal provision of MVAT Act,2002 and manner specify u/r 58 of

2) By applying method specify u/s 42(3) of MVAT Act,2005 i.e. composition Contract.

Composition Scheme under Works Contract -

1) Construction Contract - 5%.

Set off on goods used for Works Contract - 1) WC opted for normal provision i.e. apply rule 58 - Full Set off.2) WC opted for composition scheme ( Construction contract @ 5% ) - Set off afterretention of 4%.3) WC opted for composition for other contracts - Set off shall be reduced by 9 / 25 i.e. 36%i.e. allowable only 64%.

TDS provision for Works contract - 1) TDS provision applicable to payments made for works contracts.2) No such deduction is made where the aggregate amount payable to dealer is less than

b) Involvement of Goods - " Goods " must be involved in the execution of works contract.

c) Transfer of property - The property in " Goods " must be transferred ( whether as goods

d) Property must pass during execution of works contract - The property in goods must

MVAT Rule,2005. ( Example 1 ).

There are two types of Composition - Sec.42(3) of MVAT Act,2002 - ( Example 3, 4 and 5 ).

2) Other Contract - 8% ( Example 2 ).

5 Lakhs during any year.

3) Rate of TDS is 2% of the amount payable to a contractor who is registered dealer or 4% in any other case.4) No tax is to be deducted on amount of tax as well as Service Tax, if, any, Separatlely charged by the contractor.5) TDS credit can be available in the month for which TDS was deducted or in the Monthin which TDS Certificate was received - Sec. 31(4).

LEASE TRANSACTION -

What is Lease - 1) Lease is a transaction whereby the owner of an asset ( called " Lessor " ) provides suchasset to another person ( called " Lessee " ) for use over a period of time for a consideration ( called " Lease Rentals " ).2) Legal ownership of the asset remains with the lessor, and the possession and use of the asset is transferred to the lessee for a specified period.

" Lease - whether sale - The definition of Sale includes a transfer of the right to use any goods for any purpose( Whether or not for a specified period ) for cash, deferred payment or other valuable consideration. Since, Lease involves a transfer of right to use goods, therefore, " Lease " is deemed sales according to VAT Laws.

Taxability under Lease Transaction - The Taxability will arise, if, the following conditions are satisfied - a) There must be goods. Lease of things which are not goods, cannot be taxed. Therefore,Lease of Immovable property is liable to VAT.b) Transfer may be for any purpsoe, whether, Commercial or Personal Purpsoe.c) Transfer must be for cash, deferred payment or other valuable consideration. Free Leaseis not liable to VAT.d) Sub Lease of goods are also liable to VAT.e) The " Lessor " of goods must be a dealer. Lease of goods by an individual, who is not a dealer, to his friend is not liable to VAT.

Taxable Turnover under Lease Transaction - 1) Taxable turnover, in respect of Lease Transaction, will be the consideration paid orpayable for such sale. Since, the sale takes place at the time of transfer of right to use the goods, therefore, the value of such right shall be the taxable turnover.

consideration for sale.2) But, the Interest or other Finance cost shall not be laible to VAT, as the same is not


Examples -

Particulars Amount AmountTotal Contract Value ( Value of entire Contract ) √Less - Allowable deduction1) Sub - Contract Value paid √2) Labour and Service charges for execution of WC √3) Planning, Designing and Architect Fees √4) Hire charges for P/M for WC √5) Cost of Consumables in which there is no

√transfer of property. E.g. - Water, Electricity6) Other cost related to supply of Labour and Service √7) Profit related to Supply of labour and service √ ( √ )

Balance Sale price - Liable to tax under WC √

Note - 1) Above method is follow, when there is proper maintainance of booksof Account.2) If, Contractor has not maintained accounts, then, in lieu of deduction asabove, deduct a LUMPSUM DEDUCTION, provided u/r 58 ofMVAT Rules,2005.3) The sub contract value shall be deduct first from total contract value and thereafter the Lumpsum deduction allowable as per rule 58.4) The value of goods arrived as above will be liable to tax @0% / 1% / 4% / 12.5%, depends upon the nature of WC.

2) Examples of Various types of Contract - → Construction Contract.→ Printing Contract.→ Interior Decorator.→ Annual Maintenance Contract.→ Installation or Erection Contract.→ Repairs or Maintenance Contract.

3) Sale price under WC under Composition Scheme -

Particulars AmountTotal Contract Value √Less - Sub contracts ( √ )

1) Determination of Sale Price under Works Contract u/r 58

Balance Contract Value √

The Subcontract value, which is allowed to be deducted, is theaggregate value of goods on which sub - contractor pays tax orthe sub - contract value on which composition tax is paid.

4) Example of Taxability under WC -

Contract for Installation Plant and Machinery and No Sub - Contract -

Particulars

Under rule 58

Contract Value 100,000 100,000 100,000 Less - Deduction u/r 58 ( From table ) ( @ 25% ) - 15,000 - Less - Deduction of Labour and Service Charges 40,000 - - on actual basisBalance amount liable to tax 60,000 85,000 100,000

Tax @ 12.5 or @ 8% ( u/s 42(3) 7,500 10,625 8,000

Eligible Set off - Purchase of Goods - 15,000Tax @ 4% on above - 600Other Vatable expenses - 15,000Tax @ 12.5% on above - 1,875Total Tax paid - 2,475

Set off allow 2475 2475 1584( Full ) ( Full ) 64%

Balance Payable 5,025 8,150 6,416

5) Suppose in above example, there is sub contract for doing electrical installation, where the sub contractor opts for composition scheme and main contractor adopts rule 58.In this case, determination of sale price is -

Particulars

Contract Value 100,000 - Less - Sub - Contract Value (86,400) 80,000 Sale price liable to Tax 13,600 80,000 Tax @ 12.5% / 8% 1,700 6,400

15,300 86,400

CompositionScheme - Sec. 42(3)

Accounts Maintanined

Accounts Not

Maintained

Main Contracor

Sub - Contractor


Composition Scheme -

In order to reduce the burden of maintaining detailed records by dealers,there is scheme introduce by state government which is called as Composition Scheme.The Scheme is available to - 1) Resellers selling at retail.2) Restaurants, hotels ( Excl. hotels having grade " 4 Star and above ".3) Bakers.4) Dealers of second - hand passenger motor vehicles.

General features of composition scheme are as follows - a) Composition scheme is optional for dealer.b) Option one exercised would continue till the end of the financial year.c) Amount of tax under composition scheme cannot be recovered separately. Accordingly, compostion dealers canont issue Tax Invoice.d) Composition dealers are not eligible for set off on certain class ofpurchases which are specifically excluded.

1) Composition scheme for resellers selling in retail - → For the purpose of this scheme, a retailer is dealer when atleast 90% of the turnover of sales is from goods sold to person who are not dealer.→ Scheme is not available to - 1) A Manufacturer.2) An Importer.3) A dealer who effects Inter State Sales or Purchases or Branch Transferform other State.→ Class of goods excluded from scheme - Turnover of Sales or purchases not to be considered for calculation of composition.a) Drugs covered by Entry C 29.b) Notified Motor Spirit viz. High Speed Diesel, Petrol, Aviation Turbine Fuel and Aviation Gasoline.→ Turnover liable to tax under composition scheme - Turnover of sales including turnover of tax free goodsLess - Turnover of Purchases including turnover of tax free goods and tax paid on Purchases.→ Rate of tax under composition scheme - 1) 5% for retailers whose aggregate of the turnover of sales of goods covered by Schedule A and goods taxable at 4% is more than 50% of the total turnover of sales.2) 8% in any other case.

→ Conditions - a) Not entitled to claim set off in respect of the purchases corresponding to any goods which are sold or resold or used in packing of goods.b) Dealer having previous year turnover of sales - Turnover not to exceeds60 Lakhs.c) Taxable goods resold are purchased from Registered Dealer.d) Purchases of Tax free goods may be from RD or URD.

2) Composition scheme for Restaurants, Hotels etc. - → Class of dealers covered - 1) Restaurants.2) Clubs or refreshment rooms.3) Hotels ( Other than four star and above ).4) Caterers.→ Rate of tax under composition scheme - Tax payable @ 8% of the turnover of Sales or 10% in case of URD.

3) Composition scheme for Bakers - → Applicable to Sales by manufacturer of bakery products.→ Rate of tax under composition scheme - Tax payable at 4% ( 6% in case of URD ) of first 30 lakhs of turnover ofsales of goods.→ Conditions - 1) Eligibility for existing dealer - Turnover of sale of goods of brakery products not to exceeds 30 lakhs in the previous year.2) Eligibility for new dealer - concession available for 1st 30 lakhs.3) Turnover in excess of 30 lakhs, taxable at applicable rate.

→ The dealer should be registered dealer whose principle business is of buying or selling of second hand motor vehicles, whether or not soldafter reconditioning.→ Composition rate may be 12.5% or 15% of the sale price of Vehicle.

4) Composition scheme for Dealers of second hand passenger motor Vehicles -

Central Sales Tax Act,1956

Inter State Sale - According to Sec.3 of the Act, Inter State Sale means, if, Sale or Purchase of goodsa) Occasions the movement of goods from one state to another, orb) is effected by a transfer of documents of title to the goods during their movment from one state to another.

Who can collect the tax - State from which movement of goods commences is entitled to collect CST.

Sale in Transit - Any sale is to be treated as sale in transit, if, following conditions are satisfied - i) Subsequent Sale should be the very goods which were sold under the first Inter State Sale. ( Example 1 and 2 ).ii) It is to the registered Dealer, registered under CST.iii) Goods sold are covered in Registration Certificate by description of goods covered by Sec. 8(3) of the CST.iv) Form E -1 or E - 2 issued by dealer from whom the goods were purchased wereproduced.v) Form C issued by subsequent purchaser is produced.

Export Sale -

A sale or purchase of goods is deemed to be in course of export of the goods outof the territory of india, only if - i) Sale / Purchase either occassions such export, or ii) is effected by a transfer of documents of title to goods after the goods have crossed the customs frontiers of india, Sec. 5(1) of CST Act,1956.

If a sale is export sale as explained above, no sales tax is leviable under CST andMVAT Act.

High Seas Sale - Sec.5(2) of CST Act,1956 -

transfer of documents of title of goods.→ No CST is chargeable on High Seas Sale.→ High Seas transaction is always a Central Transaction even though it is made between two Local Dealers.→ The Goods cross the limits of customs port after the bill of entry and import duty is

cannot be made after filing of Bill of Entry. ( State of AP V. MMTC ).

Penultimate sale for Export -

→ It means the sale of goods before crossing the Customs Frontiers of India by way of

assessed, even though the assessed duty is not yet being paid, i.e. High seas sales

Means sale preceeding the sale occassioning export is also deemed to be in the course of export u/s 5(3).Penultimate Export Sale -

PRE - REQUISITES - 1) The transaction of last sale or purchase take place ( between B and D ) after the order received by the exporter from foreign buyer ( between B and C ).2) Accordingly B place the order with A.3) Received the consignment from A.4) Export the same goods to B.5) B shall issue " H Form " to D, for availing Exemption of sales tax.Even if, B and D resides in the same state, then, also this transaction will be consideredas Penultimate Export Sale.

Rate of Tax in case of Inter State Sale -

b) If, the sale is without C Form, then, shall be liable to pay tax at the rate applicableto the sale or purchase of such goods inside the appropriate state.In some states, like Gujarat additional tax of 2.5% will be levy, if, Inter State Saleis made without C Form.

follows - a) in the case of declared goods, shall be calculated at twice the rate applicable to the sale of purchase of such goods inside the appropriate state.b) in the case of goods other than declared goods, shall be calculated at the rate of 10% or at the rate applicable to the sale or purchase of such goods inside the appropriate state.

C → B of → D of Foreign Bombay Delhi

1)a) Every dealer, who in the course of Inter State Trade, sells to Registered dealer,against C Form, shall be liable to pay tax under this act, @ 2% of his turnover.

2) If, the sell is made to Unregistered Dealer then, dealer is liable to pay tax as


Example - 1) Sale in Transit -

Inter State Sale E 1 or E 2 Form C

First Sale B of Bombay Yes

B of Bombay K of Kochin No

K of Kochin M of Madurai No

M of Madurai H of Hyderabad - - Yes

2) Sale in Transit - Mr. X of Delhi purchased goods from Mr. Y in Punjab. Y booked the material on transportand send GR / RR ( goods receipt note issued by transporter ) to X. X instead of receivingmaterial from transport himself sold the material to Mr. Z of Delhi ( same state ) byendorsing RR / GR in the name of Z. Z takes the delivery from the transporter.In this case sale from Y to X is covered under CST and X to Z is also covered ubder CSTas sale in transit.

2) Y will issue E-1 form to X.3) Z will issue C form to X.In the above case even X & Z both are situated in Delhi but the sale transaction is covered under “sale in transit” clause of CST act, so, CST will be applicable and vat is not be charged.CST is applicable only if goods movement is from one state to other state .If goods movement is started from one state and ends in same state then CST will not be applicable.

SellingDealer

Buying Person

Is Taxableunder CST

A of Ahemadabad

A will submitE 1 to B

A should obtain Form C from B

Second Sale( During movement )

B will submitE 2 to K

B should obtain Form C from C

Third Sale( During movement )

K will submit

E 2 to M

K should obtain Form C from M

M sells after taking delivery

To complete the transaction 1) X will issue C form to Y.


Details of Forms under CST Act,1956

Sr. No. Remarks

1 A Applicant Application of Registration.2 B Department Registration Certificate under CST Act.3 C Buyer For availing Concessional rate in the Inter State trade.4 D Government Deleted

5 E 1

6 E 2

7

8 G Form of Indemnity Bond.

9 H Buyer Certificate of Export ( Penultimate sale to Export ).10 I Buyer Sale to Units in Special Economic Zone ( SEZ ).

11 J BuyerClaim Exemption u/s 6(4) of CST Act,1956, purchased byDiplomatic Mission, consulates, United Nations.

Note - Generally, F Form is issued in case of Branch Transfer from one state to another incase of Transaction took place between principle and agent, Sec. 6A ( 1 ) ofCST Act,1956, but, there is a exception to this, as stated below -

1) Stock Transfer in case of Job Work - A )In the case of State of U.P. V. M/s Ambica Steel Limited, it was held that,→ Furnishing of F Form is mandatory for claiming exepmtion by dealerfor stock transfer from one state to another for the purpose otherwise than sale.→ It is immaterial whether the person to whom goods are sent for or received is a job worker or bailee.→ The requirement of file F Form is also applicable in case of goods returned.

FormType

Issue by whom

FirstSeller

Subsequent inter state sale while goods are in movement from one state to aother. Example

1 and 2 ofCST

ExampleSubsequent

SellerSecond or Subsequent Seller in case of Inter State Salein Transit for availing Exepmtion of CST Sales.

F( Note 1 )

State who Receive

Goods

Transfer to branch or agent outside the state For availing Exepmtion, if, F Form is not submited then, it will be treated as Inter State Sale.

BranchTransfer

Who lost the Statutory

Form

B) In consequent of the above judgement, Sales Tax department of the Maharashtra State has issued Trade Circular 2T of 2010, and clarify that,F Form are mandatory for all transaction of inter state transfer ( notby way of sale ), including Job Work and goods return.


Accounts to be Audited - If, the Turnover of Sales or as the case may bePurchasesexceeds Rs. 60 Lakhs ( w.e.f. 1/04/10 ) in any year, then,get his account in respect of such year audited by an Accountant within an prescribed period from the end of that year.

Important Points - 1) Accountant - Means a Chartered Accountant within the meaning of the Chartered Accountants Act,1949 or a Cost Accountant within the meaning of the Cost and Works Accoutants Act,1959.

2) Turnover of Sales - ( Example 1 ) - 1) According to Section 2(33), it means aggregate of sale price received or receivable by a dealer in respect of sale of goods during a period after deducting a amount of, Sale price, if any, refunded in respect of goodsreturned within a period of Six Months.2) It is to be noted that, Turnover of all sales i.e. turnover of trading goods,scrap, turnover of capital assets shall be taken into consideration.If a person is carrying on business at two or more places in same date under same R. C. No., the turnover of all such business shall be taken into consideration while calculating the prescribed turnover limit.3) If, Dealer is fails to file the Audit report within the prescribed time, then, penalty will be levy, which is equal to 1/10th% of the Total Sales.4) Unlike, Income tax Audit, auditor is not required to certify the trueand fair view, but, is required to certify the correctness and completenessof VAT and CST Returns filed by the dealer.

Types of Returns - 1) Original Return.2) Revised Return -1) Can be filed within 9 Months from the end of the relevant year.2) As consequence of VAT Audit, it can be file within 30 days from the due date of filing audit report.

defect notice mentioning the defect remained in such return, the dealerwill be required to file fresh return within one month from the date of defect notice.

3) Fresh Return - If after filing original return, the department issues


Example - 1) Details of Audit Applicability - Turnover of Sale - Particulars AmountNet Sales of goods for F.Y. ( VAT + CST + Export ) √Sale of moveble property or Fixed Assets √Sales of by products √Sales of Scrap √Total Sales √Less - Sales return ( Within 6 Months Only ) ( √ )Turnover of Sales √

Turnover of Purchases - Particulars AmountNet Purchases for F.Y. ( VAT + CST + Import ) √Purchases of moveble property or Fixed Assets √Purchases of Scrap √Vatable Expenses which are debited to Profit and

√Loss AccountTotal Purchases √Less - Purchase return ( Within 6 Months Only ) ( √ )Turnover of Purchases √

2) Procedure to be followed for VAT Audit - 1) Vouch / Verify Sales and Purchase Invoices withSales and Purchase Register.2) Vouch / Verify Vatable Expenses.3) Verify the documents of Fixed Assets on whichSet off is claimed.4) Statement to be prepared - a) Purchase summary as per Return.

b) Sales summary as per Return.c) Tax Summary as per Return.d) Purchase summary as per determined or Audit.e) Sales summary as per determined or Audit.f) Tax summary as per determined or Audit.g) Reconciliation Statement between Turnover of Sales / Purchases as per VAT Audit and Profit and LossAccount.h) Working Capital Statement.5) Verify the Forms issued under CST Act, such as, C Form, F Form, H Form with relevant documents.

3) Types of Forms for Filing Return - Particulars Form No.

235

234

Works contract or leasing 233Composition scheme other than works contract 232Other Dealer 231

Oil Companies and other dealer effecting sales of Motor Spirit

Dealer holding entitlement certificate and obtaintax benefit under package scheme of incentives

53 summary on vat cst and wct

Documents