Vat, cst and online shopping

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Querist : Anonymous

Querist : Anonymous (Querist)

25 November 2011 Sir,

My question is regarding Online Business. My friend is a manufacturer of a new brand of tablet PC's. Most of his sales are online through online shopping websites. He is based in Chennai and sends his goods to all over India from Chennai charging the local Tamil Nadu VAT on the same on his auditor's advice. I am based in Bangalore. What we intend to do is to identify few computer shops in Bangalore and ask them to store (not buy) our products (perhaps as bailee?). We will list their addresses on our website. Thus, customers in Bangalore can approach these shops and buy our products and the bill will be generated online in the name of the company based in Chennai charging TN VAT (as though the sale is made online). The bill is not made in the shopkeeper's name and hence Karnataka VAT wont be applied. We will have a contract signed to that effect with the shopkeeper in the relationship of pincipal-agent. My question is, is such an agreement valid? Will the auditors be satisfied if we show them the agreement when he asks for the invoice for our products kept in the shop saying that these products are not bought by him but only stored for commission? Will the local tax officer raise an issue saying we are avoiding local tax although we are not billing locally?

Thanks much!

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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25 November 2011 Mr Author,
Your arrangement would craete some problems,as the local authorities can object to holding/storing of goods(PCs)without any documents of purchase or stock transfer.Instead you can do it this way:(1) You can send the goods to the agents on stock transfer(without TN VAT against 'F' form from the agents and such agents will sell by issuing regular VAT invoices.or(2) You can pick up customers(registered dealers)and advice your PC maker to sell directly to them against 'C' forms at 2% CST. If the customers are not RDs normal rate of TN VAT can be charged in the invoices.This arrangement would result only one inidence of tax.

Querist : Anonymous

Querist : Anonymous (Querist)

25 November 2011 Thanks so much sir, can you also clarify on whether a consignment agreement under Contract Act with the agent in Karnataka is required to issue goods against form 'F' or just the Form 'F' would be enough to hold the agent accpuntable for any misappropriation of goods? Also, I have heard that there are too many complexities in form 'F' arrangements as they are not easy to obtain and there is a lot of red tape involved. Can you thus advise me on the practicalities of a Form 'F' consignment arrangement?

Thanks again!

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MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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25 November 2011 Mr Author,
It is always an utter necessicity to appoint agents with a contrctual agreements.There can be several legal complications if stock transfers and agency appointments are done without proper agrements.Any statutory authority can(like excise,VAT IT etc) demand for this document.Along with this there should(preferably) be insurance for theft,fire etc.There need not be any problems for getting 'F' forms once the agreement of agency is furnished to the VAT officers.
For each month an 'F' form is to be used seperately. The PCs can be despatched from Chennai on a waybill(Official)and a delivery challan....MJK