Commercial and FinanceIn-direct Taxation

Brief Presentation

Different Types of Sale Transactions

VAT sales Composite sale Central sale Sale in Transit (E1/C1 sale) High Sea Sales

Basic Structure of our Contracts

Broadly three types of contracts

Supply (S) Erection

(E)Composite Contracts

(S+E)

VAT Service Tax

VAT + Service Tax

VAT – Two Different Scheme of Taxation

VAT

VAT is applicable on the supply of Goods. In a

composite contract supply part is segregated and VAT

is levied on that part.

Composite Tax

Composite Tax also known as Works Contract Tax (WCT) is applicable

on the total contract value

A Simple Example

oroJob Value = 100

Supply = 80

Erection = 20

WCT @ 4% = 4

VAT @ 12.5% = 10

Service Tax @ 12.36% = 2.472

OR AND

Central Sale

The physical movement of goods from one state to another state is called central sale

Sale is a central sale

Supplier at Delhi Sterling & Wilson (Customer) at Haryana

Central Sale

C-Form is issued by the Sterling & Wilson (Customer) to the supplier

Goods are purchased @ 2% CST against the issuance of C-Form

C- Form

The rate of tax on interstate sales is governed by Central Sales tax Act and if the sale is made to a registered dealer of the another state then the rate of tax is 2% but the registered dealer (i.e. ) the purchaser have to supply C-form to the seller . The rate of tax without C-form in case of interstate trade or commerce is equal to the rate of tax applicable in the state of the seller. In fact C-form is the proof that the sales is made to a registered dealer of another state.

Sale in Transit

“Sale in transit” is the sale of goods by the endorsement of documents during the goods are being transported

It is also known as “E1-C1 Sale” Sale in transit is done to avoid double

taxation

Sale in Transit

‘C’ Form from B to A ‘C’ Form from C to B

E1-Form from A to B

Supplier in UP

“A”

Sterling & Wilson in Delhi

“B”

Client in Haryana

“C”

Sale in Transit

It is essential that the origin and destination of goods has to be in different states

In this example “A & B” or “B & C” can be in the same state but “A & C” have to be in different states

CST is payable only in first transaction between A & B but sale between B & C is without any additional CST liability

Similarly there can be multiple transactions known as E2-C2 or E3-C3 transaction.

A simple example can be that, suppose A of Mumbai has sold goods to B of Ahmadabad. The goods are dispatched by lorry and L.R. is taken out by A (Mumbai) where in A is consignor and B (Ahmadabad) is consignee. If before taking delivery from transporter, B decides to sell his goods to ‘C’ of M.P., he can simply endorse the L.R. in name of ‘C’ and the sale will be complete. This is the second or subsequent interstate sale in the course of same movement. In this case A must have charged 4% CST in his bill. Being a second interstate sale effected by B to C, B is equally liable to pay CST on above transaction. However the intention of Government is not to levy multiple taxes on sale taking place in one course of movement. Therefore the subsequent sale is given exemption. However it is subject to production of given forms. In above example, the sale by B to C will be exempt if B produces before his assessing authority Form EI issued by A of Mumbai and Form ‘C’ issued by C of M. P.

High Sea Sales

“High Sea sales” is the same transaction as “Sale in transit” with the difference that it is applicable in imported goods

Goods are sold when they are in High Seas before they touch the Indian Customs

“High sea sales agreement” is entered into between the importer and the ultimate buyer

No VAT is payable as the sale transaction has happened outside the Indian territory

High Sea Sales

While the goods are in High Seas

High Sea sales

Agreement

Supplier in France

“A”

Importer in India“B”

Customer in India“C”

High Sea Sales

Order is placed and goods are imported by “B” from “A”

While the goods are in high seas, goods are sold by “B” to “C” by entering into a high sea sales agreement

Custom clearance of the goods is done by “C” in its own name

No VAT is applicable in this transaction

Special transactions

“Special Economic Zone (SEZ)” transactions EPCG Transaction

SEZ Transaction

Certain benefits are available in SEZ, which we pass on to the client

SEZ benefits are available in two categories:– Central Taxes– State Taxes

SEZ Benefits

Central Taxes:– Excise duty is NIL against issuance of ARE-1– CST is NIL against issuance of Form-I– Exemption from payment of Services Tax

State Taxes:– VAT – WCT– Entry Tax etc.

(Exemption is available as per State Rules)

EPCG transactions

Certain benefits are available in procurement of capital goods, which are used for increasing the exports out of India, through a scheme known as “Export Promotion Capital Goods” or “EPCG” scheme

Benefits available under the scheme:– Excise duty is NIL – Concessional custom duty @ 3.09% is payable for

imported capital goods

Procedure for Availing EPCG Benefits

Excise Duty @ NIL:– EPCG license is provided by the customer to S&W– Goods are cleared by the supplier against the EPCG

license after payment of excise duty– Refund of excise duty is done by DGFT– Refund can be claimed by

Suppler S&W Client

– Disclaimer certificate is issued by party who is not claiming refund of excise duty

Procedure of Availing EPCG Benefits

Concessional custom duty payable @ 3.09%:

– EPCG license is provided by client to S&W

– Goods are cleared against EPCG License after payment of concessional custom duty @ 3.09%

Miscellaneous Provisions in Different States

Entry Tax is applicable in some states

Road permits are applicable in certain states for inward and outward movement of goods in some states

In some states Octroi is also applicable

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