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Branch transfer

CA. Sushant Bhatnagar (Associate Manager - Taxation) (49 Points)

03 September 2013

Dear All, I have a query. This question was asked to me in an interview. I want to know expert views on the same. If a packed material priced at Rs. 1000/- is dispatched as Branch Transfer from State A to State B. However the value disclosed in delivery challan is Rs. 750/-. Would this incur any default on consignor/consignee ? My reply to interviewer was "Yes, it can be treated as avoidance of Tax" however I'm not sure if I have replied correctly. Please help by replying what will be the actual consequences of the same. Thanks & regards CA. Sushant Bhatnagar

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4 Replies

Sanket Gada (Sr. ERP Consultant & Tax Consultant) (241 Points)
Replied 03 September 2013

No Default as far as indirect taxes are concerned

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CA. Sushant Bhatnagar (Associate Manager - Taxation) (49 Points)
Replied 03 September 2013

Hi Mr. Gada, Please help in elaborate with a reason on the same. i want to understand the logic behind the same. Thanks & regards Sushant Bhatnagar

Sanket Gada (Sr. ERP Consultant & Tax Consultant) (241 Points)
Replied 03 September 2013

The levi of tax is based on the movement of goods in sales tax so there is movement between two states but the valuation is concern of consiner

Subramanya (Tax Consultant) (523 Points)
Replied 06 September 2013

The packed material purchased locally by paying Rs. 1000/- & transferred to state B by showing the value as Rs. 750. where State B will show the Branch Transfer in as Rs. 750/-

In this regard, if State A company is taken for Audit and found that while transferring the goods from State A to State B, it is under valued, you will be penalised. Also you need to ensure that to the extent of goods transferred, you have to reverse input tax amount as per the respective state act and rules.

I feel it is treated as avoidance of Tax

Request other members to comment on this to enhance my knowledge on VAT.