Query about tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

03 October 2011 Hi

I have a doubt about the tax implication.
X company is manufacturing Product on behalf of Y company with the main material supplied by them. X company is transferring the same product to Y company by charging VAT. But the main material is supplied by the y company. how can we show the cost of material in accounts. Is there any tax implication?

Pls suggest me.......

Thanks in advance

CA. Nitin Agrawal

CA. Nitin Agrawal (Expert)
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03 October 2011 Dear Anonymous

The case you have mentioned is the case of Job work, so VAT will be charged only on the material and on the value addition provided by Company X.

Example:
Company Y supplied the material worth Rs 100000 to Company X to manufacture product on there behalf.

Company X itself charged material and other OH worth Rs 50000. After adding margin Company X transfer the product in Rs 75000.

So the bill amount will be as follows:
Product XYZ 75,000
Add: Excise (If applicable) XXXX

Net of Excise XXXXXX
Add: VAT/CST
(Only on Rs 75,000) XXXX

Total Bill Value XXXXXX

Hope the query is clear, if any experts wish to make addition or correction in my reply are heartiest welcome.

Regards

Querist : Anonymous

Querist : Anonymous (Querist)

05 October 2011 But this is a domestic Product means not excisable. Main ingredient is imported. Pls tell me if there is any tax consequences?

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MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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13 October 2011 Mr Author,
As per your query X company has supplied required goods by charging the cost and vat.Y company adds some their own material and do the manufacturing process.Hence the Y company brings out a new product which is liable for excise and vat as per rules.
This is not a job work.The invoice will be on the market price and VAT. If it is excisable,it should be added before charging VAT.
MJK