Query No. 1
My client is dealing in fertilizers,
seeds, insecticides etc. From 1-4-2005 onwards fertilizers and insecticides are
liable to VAT @ 4%. Client is under the impression that sales from closing stock
as on 31-3-2005 are not liable to VAT since he observed from newspaper at that
time.
Kindly confirm or make it clear the legal
position at your earliest.
S. S. Digge
Reply
The impression on your dealer is not
correct. All sales effected on or after 1-4-2005 are covered by MVAT Act and
there is no exemption to goods sold from closing stock etc.. Had that been the
position there would not have any occasion to grant set off on opening stock. As
per law, on the sale taking place on and after 1-4-2005, the tax as per MVAT Act
is payable.
Query No. 2
My clients are manufacturers of packaging
materials, having factories in Maharashtra as well in AP. They are registered
under MVAT Act 2002 and under AP Act. While manufacturing and selling goods,
they also effect Branch Transfers of Raw Materials and also furnished goods from
Maharashtra to AP and vice versa.
As per Rule 53(3) of MVAT Rules, the set
off is required to be reduced, in case of Branch transfer, to the extent of 4%
of the purchase price of the corresponding taxable goods. However in my clients
case it is not possible to identify such taxable goods purchases, corresponding
to the stock transfer (which takes place, in relations to raw materials as also
finished goods). The question is as to how in such circumstances, to determine
the amount to be reduced from set off admissible otherwise. It is also possible
that the Branch Transfer amount may include the goods purchased OMS or from BT
Receipt from OMS.
I give below the assumed figures of sale
and purchases for easy understating.
Sales Side
| Local Sale |
OMS |
| Gross Sale |
Net |
VAT 4% |
Net |
CST |
Br. Tax Fees |
Freight |
| 2674 |
1051 |
42 |
327 |
13 |
1230 |
11 |
Purchase Side
| Local Purchase |
OMS Purchase |
| Gross |
Net Amount |
VAT |
Net |
VAT |
Purchase Amount |
BR/TR Amount |
| 3510 |
1676 |
67 |
72 |
9 |
86 |
1600 |
Kindly consider the above figures and
explain how to determine the amount to be reduced from set off admissible and
oblige.
H. P. Bhuta
Reply
When identification is not possible, the
well accepted method is ratio method. Therefore in your case you can apply ratio
method. You have not mentioned about the valuation method of Branch Transfer. If
cost prices of goods sold and Branch Transfer can be ascertained you should work
out ratio for branch transfer based on above cost prices.
On purchase side you are entitled to set
off in relation to R.D. purchases, on which tax is paid. You can apply above
ratio of branch transfer to these RD purchases and set off on purchase worked
out as per above ratio amount can be calculated after reduction.
Query No. 3
My client 'A' is a retailer in cement
under VAT. He purchases cement from dealer 'B' who's purchases are from E.C.
Holder. B charges VAT on profit. 'A' selling goods on no profit base. After some
months 'A' receives credit notes as under from 'B'.
-
D.D. Commission
- against D.D. commission paid to banker
-
Cash Discount
- against cash payment within prescribed time
-
Performance Incentive -
-
Quantity Discount -
Against quantity sale of cement
-
Exclusive Discount –
We have no specific agreement with
suppliers.
Let me explain the VAT position?
A. I. Hasmani
Reply
Since the exemption dealer is selling
goods without charging VAT, in his credit notes, there will not be any separate
amount of VAT. The issue is whether the credit notes reduce your purchase price
whereby the difference for payment will increase after receipt of credit notes.
From facts mentioned in query it appears that there is no prior agreement for
above discounts and it can be presumed that such discounts are not reducing sale
price of vendor and correspondingly not reducing purchase price of purchaser. If
this is the position then the working originally done by you will be correct.
However the above fact be get clarified from your vendor. If he is reducing his
sale price then your purchase price will also get reduced and the tax payment
will very accordingly. In short the treatment given by vendor is to be seen to
arrive at proper decision.
Query No. 4
A registered dealer manufacturer of edible
oil, non-edible oil and cotton seed oil cake. Our query regarding "Cotton seed
oil cake" only.
Under the old BST Act, the same was
exempted under Notification Entry A-3(b) issued under section 41. In MVAT Act,
also the same was covered under entry A-4. This entry A-4 was amended w.e.f.
1-5-2005. It appears from this entry that amendment is made to exempt de-oiled
cake. But certain words also deleted while doing so. My query is that whether
the "Cotton seed oil cake" which is used and sold only as cattle feed, still
covered under entry A-4(a). Your kind attention is also invited towards, that
nowhere in India cotton seed oil cake used as oil cake. It is exclusive use for
cattle feed only. Please clarify.
J. N. Sharma
Reply
I have dealt with above issue in one of
the replies given in STR of August, 2006. It is true that entry A-4(a) covers
cattle feed and an argument can be made that oil cake is covered by above entry
A-4(a). However the entries are to be interpreted harmoniously and sub-entry (c)
is also part of entry A-4. Oil cakes (other than deoiled cakes) are specifically
excluded from above entry A-4(c). Thus the intention of legislature is to
exclude the oil cakes from Schedule A. It is also pertinent to note that in the
query published in August, 2006 STR, the querist mentioned that the cotton seed
oil cakes can be used for extracting oil. Thus it cannot be said that cotton
seed oil cake is only meant to be cattle feed, though it may be useful as cattle
feed. Normally entries cannot be interpretated on particular use to which the
goods are put but upon general nature of goods. The issue is required to be
examined from above angle also. In my opinion considering the set up of entry
A-4 as a whole, cotton seed oil cake cannot be covered by entry A-4(a).
