consignment sale

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khyati (Querist)
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26 November 2010 Pl give detail explanation about consignment sale, consigement sale agreement, sales tax levy & sales tax declaration form for making consignment sale.

S. Karthi

S. Karthi (Expert)
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26 November 2010 Instead of making direct sales, individuals and businesses often place goods with others who make sales for them. These types of transactions are commonly called consignment sales. In most cases, the owner of the item (the consignor), and the seller (the consignee), need to register with us to obtain a seller’s permit, and report and pay sales on their returns. However, if you make no more than two qualifying sales or consignments in any twelvemonth period, your sales are generally considered “occasional sales”, and you do not have to register for a seller’s permit or report those two sales.

Example:
An antique bottle collector (the consignor), places five bottles on consignment with an antique store (the consignee), which issues the bottle collector a resale certificate. The store sells the bottles for Rs. 1500 and pays the collector Rs. 750 when the sales are final. The collector’s Rs. 750 in proceeds are nontaxable sales for resale. The store must pay sales tax on the full Rs.1500 it received for the bottles.

and, you have to submit for form F for each & every month. as We have seen that when the goods are despatched to another State on consignment basis or to branch of dealer in another State, there is Inter State movement of goods but there is no sale and hence no CST is payable. This provision is often misused and goods are despatched in the garb of consignment or branch transfer though actually it may be a sale. Hence, section 6A(1) of CST Act provides that when a dealer claims that the Inter State movement of goods is not a sale, he has to prove the same. (In legal terminology, it is called that ‘burden of proof’ is on the dealer). For this purpose, he must produce a declaration in ‘F’ form received from Consignment Agent or Branch Office in another State.

As per section 6A(1) as amended w.e.f. 11-5-2002, submission of F form is mandatory to prove stock transfer. Otherwise, the transaction will be treated as ‘sale’ for all purposes of CST Act.

Goods can be sent to other State for further manufacture - Goods can be purchased at concessional rate if the goods are for use in the manufacture. Thus, after manufacture, the sale need not be in the same State. In Indian Aluminium Co. Ltd. v. STO - (1993) 90 STC 410 (Ori HC DB), the company was manufacturing Aluminium Ingots at Hirakud, Orissa. These were despatched to plants of the company in other States for further manufacture of Aluminium coils, sheets etc. Plants in other States were sending ‘F’ forms. The department accepted the forms without any objection.

One form F covering receipts during the month can be issued. If space in form F is not adequate, a separate list may be attached as annexure to form F giving details, provided that the annexure is firmly attached to the form. The blank form has to be obtained from sales tax authority in which the transferee is situated, i.e. State where goods were received. If the form is lost, indemnity bond has to be given and duplicate form clearly marked as ‘Duplicate’ can be issued.