GOODWILL WHETHER SALES TAX APPLICABLE?
This query is : Resolved
12 November 2007
DESCRIPTION OF THE CASE:
· The Transactions happened in the year 2001-02
There were 3 Companies in existence. Company A, Company B and Company C. Company A and B were merged/amalgamated with Company C. All these companies were having businesses in trading and distribution (not involving in any software or allied business)
The scheme of amalgamation was Assets and Liabilities of A & B were taken over by C at their book values.
Over and above this Shareholders of A and B got certain shares in C in the specified proportion and value.
Company C created Goodwill Account equal to difference of New Value of shares in C less Old value of share capital in A and B put together.
There were no transactions in cash or by cheque towards Goodwill creation. Consideration was only by way of issuance of shares in C.
Opinion required on:
1. Does this Goodwill attract any Sales Tax in the year 2001-02. If yes at what rate?
2. Company C’s Sales Tax assessment completed and order was passed for the accounting year 2001-02.
3. Under Amnesty scheme 2004 Company C paid the differential amount (aspects other than the aforesaid Goodwill) on certain other discrepancies pertaining to year 2001-02.
4. Considering aspects/developments 2 and 3 above even if ST is payable on Goodwill, whether the same can be claimed by the department now.
· The Transactions happened in the year 2001-02
There were 3 Companies in existence. Company A, Company B and Company C. Company A and B were merged/amalgamated with Company C. All these companies were having businesses in trading and distribution (not involving in any software or allied business)
The scheme of amalgamation was Assets and Liabilities of A & B were taken over by C at their book values.
Over and above this Shareholders of A and B got certain shares in C in the specified proportion and value.
Company C created Goodwill Account equal to difference of New Value of shares in C less Old value of share capital in A and B put together.
There were no transactions in cash or by cheque towards Goodwill creation. Consideration was only by way of issuance of shares in C.
Opinion required on:
1. Does this Goodwill attract any Sales Tax in the year 2001-02. If yes at what rate?
2. Company C’s Sales Tax assessment completed and order was passed for the accounting year 2001-02.
3. Under Amnesty scheme 2004 Company C paid the differential amount (aspects other than the aforesaid Goodwill) on certain other discrepancies pertaining to year 2001-02.
4. Considering aspects/developments 2 and 3 above even if ST is payable on Goodwill, whether the same can be claimed by the department now.
12 November 2007
I don't think sales tax can be levied on the amount of Goodwill created by a company. Sales tax is a levy by the State on the consideration received/paid for sale or purchase of goods by a person of some movable goods.
Creation of goodwill is a mere book entry and i don't think there is any sale involved therein. Neither is the goodwill created as a result of transfer of any movable assets.
You may however, have to verify the taxability aspect from the point of view of 'sale of business undertaking' as provided in the sales tax law of your state.
Any comments? - mail to in9437015847@gmail.com
Creation of goodwill is a mere book entry and i don't think there is any sale involved therein. Neither is the goodwill created as a result of transfer of any movable assets.
You may however, have to verify the taxability aspect from the point of view of 'sale of business undertaking' as provided in the sales tax law of your state.
Any comments? - mail to in9437015847@gmail.com
12 November 2007
NO there is no sales tax applicable on Goodwill. Sales Tax applicable only on physical goods movement except software.
12 November 2007
Sales Tax is not applicable on the Goodwill.
It is specifically stated in PWC Manual. (Reference Material).
It is specifically stated in PWC Manual. (Reference Material).
17 November 2007
I can send you reference material by Courier. My id is drk59@rediffmail.com
19 November 2007
Dear Kapil
If you can please send for my reference on the following address
Dayal k
36, Navyug society,
Vishnunagar,
Naupada,
Thane 400 602
I shall re-imburse the courier charges, Thanks
If you can please send for my reference on the following address
Dayal k
36, Navyug society,
Vishnunagar,
Naupada,
Thane 400 602
I shall re-imburse the courier charges, Thanks
19 November 2007
Kapil Sir,
I will be highly obliged, if your good self send me the said reference materials at the address sent to you in p.m.
I will be highly obliged, if your good self send me the said reference materials at the address sent to you in p.m.
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