CST-VAT-WCT

8/10/2019 CST-VAT-WCT

1/34

Indian Business Tax Structure

Direct Tax

Income Tax Wealth Tax Gift Tax

Customs

Indirect Tax

Central Excise Service Tax Sales Tax OtherCommercialTaxes


2/34

Constitutional Background No tax shall be levied or collected except by authority of

law. Article 265

State Govt. cannot impose tax on sale or purchase duringimports or exports; or tax on sale outside the state. Article286(1)

Parliament is authorised to formulate principles fordetermining when a sale or purchase takes place (a)outside the state (b) in the course of import and export.

Article 286(2)

Parliament can place restrictions on tax on sale orpurchase of declared as goods of special importance andthe state government can tax such declared goods onlysubject to these restrictions. Article 286(3)


3/34

Constitution of India

7 th Schedule

Union List List I State List List II

Entry 92A Taxes on saleor purchase of goods otherthan newspaper where such

sale or purchase takesplace in the course ofinterstate trade or commerce.

Entry no. 54 Tax on saleor purchase of goods otherthan newspaper except on

interstate sale or purchase.

Central Sales Tax Act State VAT Acts


4/34

Indian Sales Tax Laws

CST

International cross Border Transactionsinvolving export and import of Goods throughIndian customs frontiers

Interstate sale involving movement of goodsinterstate origin state and destination state

Sale of Goods of special importance Declared goods, sold any where in India

0%

< or = 2%

< or = 5%

LSTSale of Goods of special importance

Declared goods, sold any where in India

Other than Declared Goods unrestricted Sovereign Rights

< or = 5%

An y Rate


5/34

Interstate Sale

Sale of goods. movement of goodsinterstate that is fromone state to another.

Inseparably connected Inextricably connected


6/34

A B Ahmedabad Bangalore

Is there Sale of goods ? Is there Movement of goods Interstate ? In which state does the ownership pass? Which is the appropriate state for collection of

tax ?

He likes the goods. Provides the visiting card with details Provides a purchase order

Makes a payment Requests B to ship the goods to Ahmedabad Which state is the appropriate state for collection of tax

Illustration 1

Salehappens inKarnataka

Karnataka isthe

appropriatestate to

collect CST


7/34

A B Ahmedabad Bangalore

Is there Sale of goods ? Is there Movement of goods Interstate ? In which state does the ownership pass? Which is the appropriate state for collection of

tax ?

He likes the goods. Provides the visiting card with details Provides a purchase order, Makes a payment

Requests B to ship the goods to Ahmedabad With a condition that goods will be accepted only if the

quality controller in Ahmedabad approves the goods. Quality controller approves the goods in Ahmedabad

Illustration 2

Salehappens in

Gujarat

IS Gujaratthe

appropriatestate to

collect CST

ORIGINBASED

LAW


8/34

Interstate Sale

Sale of goods. movement of goodsinterstate that is fromone state to another.

Inseparably connected Inextricably connected

ORIGINBASED

LAW .

CENTRALENACTMENT

STATEIMPLEMENTATION

STATECOLLECTION

STATEENJOYMENT .


9/34

A B

Ahmedabad Bangalore

A places order on B at Bangalore for supply ofgoods

B delivers the goods from the Hyderabadfactory, as he does not have sufficient stock atBangalore.

Which is the appropriate state for collection oftax

Illustration 3

ORIGINBASED

LAW

AndhraPradesh is

theappropriate

state tocollect CST

B

Hyderabad


10/34

A BBangalore Bangalore

A is in Bangalore. B is also in Bangalore They are next door neighbours A places order on B to supply goods and deliver

at the project site in Madhya Pradesh

Is it an interstate sale?

Illustration 4

ORIGINBASED

LAW Karnataka

is the

appropriatestate tocollect CST

A

Bhopal


11/34

Lessons learnt

Whether ownership passes before the movement of goods or afterthe movement of goods is irrelevant

Whether the ownership passes at the originating state or thedestination state is irrelevant

The location of the buyer and sellers are also irrelevant

The place where documentation is done is also irrelevant

What is relevant is From which state does the goods originate

from? with respect to the contract of sale? That Originating state is the appropriate state for collection of taxes.


12/34

Types of CST Transactions Interstate Sale at concession rates Sale in transit

Branch transfer and consignment sales Sale in the course of export Sale to SEZ units Deemed Exports Sale to special entities WHO, UNESCO

diplomatic missions, consulate offices.


13/34

Form Raj Form A Application Form B Registration Certificate Form C - Declaration of continuing registration status Form D sale to Governments Form E Sale-in-transit Form F Branch Transfers Form G Indemnity Bond on loss of forms Form H Sale in the course of Export Form I Sale to SEZ Units Deemed Export Form J Sale to Special Entities


14/34

IN - TRANSIT - SALE

Maharashtra Gujrat Gujrat Gujrat

RR RR

BA C D


15/34

IN - TRANSIT - SALE

Tamil Nadu Karnataka Andhra Pradesh Kerala

RR RR

BA C DC FormC FormC Form


16/34

IN - TRANSIT - SALE

Tamil Nadu Karnataka Andhra Pradesh Kerala

RR RR

BA C D

E2 FormE2 FormE1 Form

C Form C Form C Form


17/34

Movement of goods otherwise thanby way of sale

Movement of goods interstate for purposes of Exhibition and return Repair and return Job work and return Stock and future sale of goods in the destination

state Of generic goods (without customer identity) Not against pre-existing order of sales (premeditated

sales)


18/34

Documentary Proof Form F Movement of goods otherwise than by way

of sale has to be supported by F form from the destination state Lorry receipt from the transporter Delivery note issued by the sales tax dept

Way bill Road permit Delivery note [ VAT 515 in Karnataka]


19/34

Loss of Statutory Forms Indemnity in Form G

Make police complaint for loss of forms Make newspaper advertisement for loss of forms

One in local vernacular language One in English Daily

Execute a indemnity document in Form G Promise to make good any consequential loss that

may arise to the Government due to misuse or abuseof the lost forms by any body else


20/34

Sale in the course of Export Form H The penultimate sale, preceding the ultimate export sale,

is exempt from tax The export order should be first received, by the merchant

exporter

The goods should be then purchased for export. This benefit isnot available for manufacturer exporter

The goods purchased and the goods exported must be same.

Export cannot be out of stock, but only from purchases forpurposes of export

Exporter should issue H form

Exporter should provide the proof of physical export, that is bill oflading, packing list etc attested by customs.

Packing materials purchased for export is also eligible for this taxexemption


21/34

Sale to SEZ Form I Sale to SEZ or developer of SEZ is deemed to be export.

The sale should be to a unit residing in the specialeconomic zone

The goods are to be used for export

The buyer should issue form I

The form I should be countersigned by the ExportCommissioner under whose jurisdiction the SEZ islocated.

Even the developer of the SEZ is eligible for theexemption


22/34

Sale to Special Entities Form J Govt of India has entered into a treaty to exempt

the special entities from consumption tax[indirect taxes]

Sale to special entities are exempt, against Issue

of form J. The special entities are

UN organizations like WHO UNESCO etc

Diplomatic missions embassies Consulate General offices of other countries.

They are not allowed to resell, but they can takethe goods to their own country.


23/34

VAT: An Example

A: Supplier of Raw material; B: Manufacturer;C: Wholesaler; D: Retailer Tax rate = 10%

SAL ES TA X DEPARTMENT

A B C D

1010 5

5

100+10 200+20 250+25 300+30

Consumer

Note: Total tax collected = 10+10+5+5 = 30

Which is also equal to 10% of 300 = tax paid by consumer.


24/34

BManufacturer

Sale Value Rs. 200.00Gross VAT 10%; Rs. 20.00Net VAT Rs. 20-10=10.00

Different Stages of VATC

Wholesaler


ARaw Material Producer

Sale Value Rs. 100.00Gross VAT 10%; Rs. 10.00

Net VAT Rs. 10.00

DRetailer


Note: Total VAT collected at four point; 10+10+10+10 = Rs. 40.00


25/34

Vat Issues Interstate purchases is not vatable against local sales tax collected.

Interstate sale is vatable against the local purchase tax paid. Govtloose.

Input tax is allowed to be rebated only if you collect out put tax. Otherwise input tax will become your cost. In VAT Law Exemption means

punishment Exporter is refunded the input taxes paid on inputs relatable to

export. This is called zero rating of input taxes

Zero Rating of input taxes is allowed even to persons selling againstH form or I form.

With respect to Branch transfer, input tax credits are allowed eventhough there is no output tax. Input tax only to the extent of 2% is notVatable. Input taxes paid in excess of 2 % are VATABLE.


26/34


27/34


28/34

Capital Goods

They are used in the business of the dealer

forresale, or use in the manufacture for sale Plant and equipment Goods carriage vehicle

Material handling equipment Pollution control equipment Cold storage equipment, storage equipment Billing equipment, including computers

The input taxes paid on purchase of suchequipment is allowed to be used for payment ofoutput tax liabilities.


29/34


30/34


31/34


32/34

Assessable Value Merit I approach

6,000Taxable value of goods used in the works contract5.

720Tax at 12%6.

120Less Input tax credits on local purchases7.

600Net out put tax payable8.

4,000Less: Actual cost of labour together with share of profits4.

10,000Revised Gross Value3.

2,000Less: Assessable in Originating State (Exclusion)2.

12,000Gross Value of Contract1.

Rs.Value in Crores


33/34

Assessable Value Merit II approach

7,000Taxable value of goods used in the works contract5.

840Tax at 12%6.

120Less Input tax credits on local purchases7.


3,000Less: Standard Deduction as per prescribed say @30%4.




Rs.Value in Crores


34/34

Composition

10000Taxable value of goods used in the works contract5.

400Tax at 4% composition rate6.

NILLess Input tax credits on local purchases7.


NILLess: Labour deductions4.




Rs.Value in Crores

Input tax credit not allowed Output tax cannot be collected Tax invoice cannot be issued No interstate purchases or import purchases.

CST-VAT-WCT

Documents

Transcript of CST-VAT-WCT