VAT & Sales Tax Liability

This query is : Resolved

Prashant (Querist)
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11 May 2009 If One Co. Sales his manufactured product "X" giving offer "Y" free on it showing in invoice (which is not manufactured by Co.
Is their any liability to charge Tax on "Y"
If No Is Co. Take Vat Input on purchase of Y Items?

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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11 May 2009 In normal circumstances the value of Y would also have been included in the value of present or future sales of X. Therefore I see no reason to deny the input deduction/ credit for purchase of Y unless the local VAT laws preclude the same.

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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11 May 2009 Tax on Y would be paid by the person to whom the product is sold.
Input tax credit will be allowed.

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Prashant

Prashant (Querist)
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12 May 2009 " Tax on Y would be paid by the person to whom the product is sold.
Input tax credit will be allowed. "

This means Y Product sold to customer by Co. which is shown in bill with zero value and add vat on Y in bill
is it correct???

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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12 May 2009 No.
Since there is no value of Y being shown by the Co. in its invoice, automatically it gets charged to VAT at an inflated rate when being sold by the purchaser.