10 December 2009
I am heading accounts in an engineering company at kolkata, WB which mainly deals with turnkey projects of steel companies. We are registered vendor for CST & VAT in WB only. I am facing a problem in VAT-CST issue in my company which has described below:-
Suppose, the company name is ABC LTD which took a contract from TATA, Jamshedpur for Rs 100 Cr (including CST) to built a furnace. We got a billing schedule detailing lots of items totaling Rs 100 Cr. We do purchase by exempted 6(2) sales (Sale-in-transit under CST Act). Our purchase methodology: (1) Issue PO's to vendor, (2) Give instruction to supply the material to TATA (client) by putting "A/C ABC LTD" on his invoice. (3) Vendor directly sent material to TATA with original excise - transporter's copy with LR. (4) Vendor send me invoice with original excise - buyer copy & LR photocopy. (5) We pay to the vendor. Our billing methodology: (1) We bill to TATA (client) with vendor's buyer copy and photocopy of LR as per our billing schedule item.
** If we purchase material from outside of WB & Jharkhand then it will be OK. I will give C form to vendor and Vendor will issue E1 form to me.
** If we purchase material from WB then vendor will charge VAT to me (intra state transaction) which will be my cost because I can’t bill to TATA at Jharkhand by putting VAT (inter state transaction). So it is also OK to me.
** My question:- If we purchase material from Jharkhand and vendor send the material to TATA at Jharkhand as per my delivery instruction then what will be the implication of VAT? Do I need to charge VAT on my sales bill to TATA as the material is going from Jharkhand to Jharkhand (intra state)?
^^ My logic: I agree that the vendor will charge VAT at Jharkhand in his invoice as it is local purchase to me at Jharkhand. But I am sending my sales invoice to TATA from WB to Jharkhand so it is not VAT transaction but CST transaction. Hence I can’t charge VAT on my sales bill to TATA. Further reading, there is an item "X" in my billing schedule which comprising 5 different material. Here if I purchase 3 materials from outside of WB & Jharkhand and 2 materials from Jharkhand then it is not possible for me to bill TATA giving segregated value of "X" item. Moreover, I am not a CST / VAT registered dealer in Jharkhand then how I can adjust VAT input & output in Jharkhand.
Your question is quite comprehensive and need some efforts before we conclude.
Further your understanding in (**1)is subject to dicta pronounced by Apex court in A&G Projects decision and in (**2)is not correct as still you can plan your transaction and avail benefit of Section 6(2).
Suggest if u can assign this work to us and in turn we will provide you written opinion addressing all your concerns.
13 December 2009
in ponit no 2, you can avail the VAT credit, and can set off your CST liability with VAT input. as "beyond consultants" said you can replan your transaction.
CAclubindia
