Tax on inv

This query is : Resolved

joy jacob (Querist)
Follow

22 July 2010 Hello sir

I have a query , I have

A - purcaser

B - Seller

C - Final Consumer

B is selling goods to A, and A is selling to C , B & C are in same state, what tax would be applicable

how the invoice would be created betwwen all these.

I understand this is not E1 sale , as first seller and final consumtion is in same state

Pls reply asap, as metter is urgent

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
Follow

22 August 2010 yes. your case is E-1 sales only

joy jacob

joy jacob (Querist)
Follow

23 August 2010 Sir thanks for reply, could you please help me to understand as B & C are in same state, meaning :-
1.physically material not moving out of state.
still this would be a E1 sale
2.What tax applied on invoices when invoiced by all to each other and final seller to end user

Regards
joy jacob

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

26 July 2025 Hey Joy,

Here’s a clear explanation of your scenario:

---

### Setup:

* **B (Seller)** and **C (Final Consumer)** are in the **same state**.
* **A (Purchaser)** is in **another state**.
* Goods flow: B → A → C
* Goods physically move **from B’s state to A’s state**, then from A’s state to C’s state (or C is in B’s state?). You mentioned B & C are in the same state, so goods must move out of that state to reach A and then come back?

---

### E-1 Sale and Tax Implications:

* **E-1 Sale** (Under CST Act): Sale where goods are sold by a dealer in one state to a dealer in another state **and** the goods are delivered from the first state to the second state.

* In your case:

* If **goods physically move from B’s state to A’s state**, B → A is an **inter-state sale**.
* **B should issue a CST invoice** to A, charging **CST @ 2%** (if B has CST registration and A provides Form C).

* Next, A sells goods to C:

* Since **A and C are in the same state (A’s state)**, it is an **intra-state sale**.
* A will charge **VAT (or GST, if applicable)** to C as per that state’s rate.

---

### Invoice & Tax Summary:

| Transaction | From | To | Tax Type | Tax Rate | Invoice Type |
| ----------- | ----------- | ----------- | ---------------- | ---------------- | --------------- |
| Sale 1 | B (State 1) | A (State 2) | CST (Interstate) | 2% (with Form C) | CST Invoice |
| Sale 2 | A (State 2) | C (State 2) | VAT or GST | State rate | VAT/GST Invoice |

---

### Points to Note:

* **B to A sale is interstate** because goods move from one state to another.
* **A to C sale is intra-state** because both are in the same state.
* **Physical movement of goods** defines whether it is interstate or intra-state for tax purposes.
* Form C (or its GST equivalent) must be provided by A to B to get concessional CST @ 2%.
* If no Form C, B has to charge CST at normal rate (which is equal to VAT rate, but no input credit allowed).

---

### So:

1. Yes, it is an **E-1 sale** because goods are moving from B’s state to A’s state.
2. Tax applied:

* B invoices A with CST at 2% (if Form C provided).
* A invoices C with VAT/GST at applicable rate.
3. Invoice must clearly mention CST on B→A invoice and VAT/GST on A→C invoice.

---

If you want, I can help draft sample invoice formats or further clarify any step. Let me know!

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now