Vat on mrp
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
16 April 2016
Dear All,
One of my client "A Pvt Ltd." ( registered dealer in west bengal) purchase Food supplements & medicines from another dealer "B" in west bengal & pay VAT on MRP. Now the question is:-
1. If "A" sold these products in west bengal, then whether they have to collect VAT from customer & claim Input of VAT paid. I think this will be immaterial because VAT is already paid on MRP ??
2. If A Pvt Ltd. again sold these products outside West Bengal to their franchisee, then what will be the VAT implication? Whether franchisee will again collect VAT from their customer & pay to their state government??
3. If A pvt Ltd. transfer these goods to there own retail outlet outside West Bengal for sale? Then whether the retail outlet will again collect VAT from customer & paid to their state government?
One of my client "A Pvt Ltd." ( registered dealer in west bengal) purchase Food supplements & medicines from another dealer "B" in west bengal & pay VAT on MRP. Now the question is:-
1. If "A" sold these products in west bengal, then whether they have to collect VAT from customer & claim Input of VAT paid. I think this will be immaterial because VAT is already paid on MRP ??
2. If A Pvt Ltd. again sold these products outside West Bengal to their franchisee, then what will be the VAT implication? Whether franchisee will again collect VAT from their customer & pay to their state government??
3. If A pvt Ltd. transfer these goods to there own retail outlet outside West Bengal for sale? Then whether the retail outlet will again collect VAT from customer & paid to their state government?
16 April 2016
In 1 Case Wholesellerwill charge Vat on MRP. So subsequent dealer Get input on MRP..
2. Interstate Sale CST is applicable not Vat , So Distributor Collect CSt instead of VAT , so Franchise will not get Input Tax benefit.
2. Interstate Sale CST is applicable not Vat , So Distributor Collect CSt instead of VAT , so Franchise will not get Input Tax benefit.
Querist : Anonymous
Querist :
Anonymous
(Querist)
16 April 2016
In case 2:- Whether franchisee need to collect VAT at the time of sale in their state & deposit to Government?
What will happen in Case 3??
What will happen in Case 3??
16 April 2016
you have to colleact MRP Value but Franchise will not get in put Benefit.
in case 3 Goods will be Branch transfer without vat discharge vat in other state
End customer will not affect only Dealers will not get input in 2 and 3rd case
in case 3 Goods will be Branch transfer without vat discharge vat in other state
End customer will not affect only Dealers will not get input in 2 and 3rd case
Querist : Anonymous
Querist :
Anonymous
(Querist)
16 April 2016
But Sir, In case 2 & 3 VAT is paid to government twice on same products. One in west Bengal & Another in the 2nd state..Is it viable??
02 August 2025
Great questions! VAT on MRP and inter-state sales can get tricky, so here’s a clear breakdown based on your scenarios:
---
### Scenario 1: Purchase and Sale within West Bengal (WB)
* Dealer B sells to A Pvt Ltd. in WB **charging VAT on MRP**.
* Dealer A sells to customers in WB, charging VAT on MRP again?
**Answer:**
* The **wholesaler (Dealer B) charges VAT on MRP**. Dealer A gets input VAT credit on that VAT paid.
* When A sells to retail customers within WB, **they also charge VAT on MRP**, but input VAT can be claimed on purchases.
* This avoids VAT cascading because input credit is adjusted against output VAT.
---
### Scenario 2: Dealer A sells goods from WB to franchisee in **another state** (interstate sale)
* This sale is treated as **interstate sale**, so **Central Sales Tax (CST)** applies instead of VAT on inter-state transfer.
* Franchisee in other state sells to end customers, charging VAT applicable in their state.
**Answer:**
* Dealer A charges CST to franchisee on transfer from WB.
* Franchisee will charge **VAT in their own state** when selling to end customers.
* **Franchisee cannot claim input VAT credit on CST paid**, because CST is different from VAT.
* This means no double input credit but VAT is charged only once in the final sale.
---
### Scenario 3: Dealer A transfers goods to their own retail outlet outside WB
* This is a **branch transfer** to another state.
**Answer:**
* Such branch transfers usually attract CST (interstate transfer).
* Retail outlet will collect VAT from customers in their state on final sale.
* Branch (Dealer A) does **not pay VAT twice** but CST is paid on branch transfer.
* Retail outlet charges VAT on sale to end customer.
* Input credit for CST is not available to the branch outlet (since CST is different from VAT).
---
### Your concern about double taxation:
* **VAT is charged only once on the final sale to end customer.**
* CST is a tax on interstate movement but does not allow input credit for VAT.
* So, while CST is paid on inter-state transfer, the final VAT is paid only by the end consumer.
* The input credit mismatch is due to CST vs VAT difference, not double taxation of VAT.
---
### Summary:
| Case | Tax on Transfer | Tax on Final Sale | Input Credit on Purchase |
| ---------------------------- | --------------- | ------------------ | --------------------------- |
| Within WB | VAT on MRP | VAT on MRP | Input credit allowed |
| Inter-state sale (Franchise) | CST | VAT in other state | No input credit on CST paid |
| Branch transfer outside WB | CST | VAT in other state | No input credit on CST paid |
---
If you want, I can help with exact references from West Bengal VAT Act or further clarify how to handle invoices and tax credits for these cases. Would you like that?
---
### Scenario 1: Purchase and Sale within West Bengal (WB)
* Dealer B sells to A Pvt Ltd. in WB **charging VAT on MRP**.
* Dealer A sells to customers in WB, charging VAT on MRP again?
**Answer:**
* The **wholesaler (Dealer B) charges VAT on MRP**. Dealer A gets input VAT credit on that VAT paid.
* When A sells to retail customers within WB, **they also charge VAT on MRP**, but input VAT can be claimed on purchases.
* This avoids VAT cascading because input credit is adjusted against output VAT.
---
### Scenario 2: Dealer A sells goods from WB to franchisee in **another state** (interstate sale)
* This sale is treated as **interstate sale**, so **Central Sales Tax (CST)** applies instead of VAT on inter-state transfer.
* Franchisee in other state sells to end customers, charging VAT applicable in their state.
**Answer:**
* Dealer A charges CST to franchisee on transfer from WB.
* Franchisee will charge **VAT in their own state** when selling to end customers.
* **Franchisee cannot claim input VAT credit on CST paid**, because CST is different from VAT.
* This means no double input credit but VAT is charged only once in the final sale.
---
### Scenario 3: Dealer A transfers goods to their own retail outlet outside WB
* This is a **branch transfer** to another state.
**Answer:**
* Such branch transfers usually attract CST (interstate transfer).
* Retail outlet will collect VAT from customers in their state on final sale.
* Branch (Dealer A) does **not pay VAT twice** but CST is paid on branch transfer.
* Retail outlet charges VAT on sale to end customer.
* Input credit for CST is not available to the branch outlet (since CST is different from VAT).
---
### Your concern about double taxation:
* **VAT is charged only once on the final sale to end customer.**
* CST is a tax on interstate movement but does not allow input credit for VAT.
* So, while CST is paid on inter-state transfer, the final VAT is paid only by the end consumer.
* The input credit mismatch is due to CST vs VAT difference, not double taxation of VAT.
---
### Summary:
| Case | Tax on Transfer | Tax on Final Sale | Input Credit on Purchase |
| ---------------------------- | --------------- | ------------------ | --------------------------- |
| Within WB | VAT on MRP | VAT on MRP | Input credit allowed |
| Inter-state sale (Franchise) | CST | VAT in other state | No input credit on CST paid |
| Branch transfer outside WB | CST | VAT in other state | No input credit on CST paid |
---
If you want, I can help with exact references from West Bengal VAT Act or further clarify how to handle invoices and tax credits for these cases. Would you like that?
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