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Sale in transit

Bharat M Durgiya (Belive in Best) (86 Points)

21 January 2012

Can Any 1 explain the concept of Sale in Transit with Example and is there any concept called purchase in transit!!?

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4 Replies

Ravi Prasad (Self employed) (148 Points)
Replied 22 January 2012

Sale in transit means any sale which happens when the goods are sold again before the receipt of the same in the course of interstate trade or commerce. Suppose A sells the goods to B in another state and the movement of goods begins to be delivered to B. But B, even before he receives the goods, sells the entire lot to C, endorses the documents to the title of the goods to C. Then C receives the goods as a result of sale transaction directly. This is sale in transit. B must issue C Form to A and collect E-1 form from A. He also has to collect C-Form from C. Then he has to submit E-1 and C form so collected to claim deduction on the turnover as sale in transit.

This can also happen many times over for eg. C can sell again to D and D to E. The procedure continues.

For C, it is an interstate purchase. It can also be called Purchase in transit. But this doesnot have any difference as far as CST Act is concerned.

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Bharat M Durgiya (Belive in Best) (86 Points)
Replied 22 January 2012

Thank u Friend!! and i wanna ask that in above example then what entry will B pass in his book i.e what will be effect of purchase by B in his own book or will it be direct pur form A and direct sale in transit! and will B record Purchase in his book and How will he earn profit!

Kush (Partner) (23 Points)
Replied 22 July 2013

Can anyone also clarify if the following transaction confirms to "sale in Transit" -

A is a seller in Haryana and sells goods to B in Mumbai thru road transport.

Before the goods reach Mumbai, he sells the same to C in Punjab. Now the goods have to change transports to be diverted to Punjab and this can be done only after the goods reach Mumbai.

So, will this be within the ambit of "sale in Transit" ??

Sandeep Jadhav (Bcom ITP STP ITRPS STRPS CS CA FINAL) (1092 Points)
Replied 20 May 2015

Movement from one state to another:

In above case when goods are given to carrier or transporter for transportation .the movement of goods starts at the time of delivery to carrier and terminated at the time when delivery is taken back from such transporter /carrier. As per point two above CST is applicable if sale is done while goods movement from one state to another state.Its called E-1 transaction or sale in transit.suppose: X situated in Delhi purchased goods from Y in Punjab .Y booked the material on transport and send GR/RR(goods receipt note issued by transporter) to X. X instead of receiving material from transport himself sold the material to Z in Delhi (same state) by endorsing RR/GR in the name of Z.Z takes the delivery from the transporter .In this case sale from Y to X is covered under CST and X to Z is also covered Under CST as sale in transit.To complete the transaction X will issue C form to Y ,Y will issue E-1 form to XZ will issue C form to XIn the above case even X & Z both are situated in Delhi but the sale transaction is covered under "sale in transit" clause of CST act so CST will be applicable and vat is not be charged.CST is applicable only if goods movement is from one state to other state .If goods movement is started from one state and ends in same state then CST will not be applicable.The Point is to be noted here that starts and end so if the start and end of movement of goods is interstate then CST will be apply but if start and end both in same state then vat will be applicable .suppose goods start movement from x state and moved through y state but movement of goods ends in x state then Vat will be applicable.Goods moved from one state to another state for export/Import transaction and branch transfer are not covered under CST.so location of the parties and billing is not important but movement of goods is important to decide whether CST is applicable or VAT is applicable.

Now point wise answer to your queries As explained above

if goods are moved with in the state then VAT will be applicable .No Form is required.the above situation can arise only if the seller has a branch office in the purchaser state.In this vat of the Purchaser's state will be applicable.Seller can not charge their state Vat In this case. As goods are to be moved from one state to other state so CST is applicable .No matter seller and purchaser belongs to same state.