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Sale on commission basis

anuj (auditor) (154 Points)

10 January 2012

our company is multi level marktting (MLM)company.we are selling goods to a stockpoint on DP Price Rs 1000/- on which we charge and pay vat.and now this stockpoint also sell goods at RS 1000/- only and he received commission from us for the purchases done by his stockpoint.my question is

1)how that stockpoint should make a bill.is he liable to vat? as he is selling goods on the same price.he is receiving only commission from us.
2)or what else the procedure should be for the above transaction.

please give some solution and your valueable advice

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3 Replies

Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 11 January 2012

For VAT to be levied in any state there should be a DEALER and the dealer should have a BUSINESS .

In the current case the person selling the goods is only an agent of your company and not a seller .

VAT is charged by your company on Rs. 1000 and is collecting it from the customers . It means that the goods sold by the stockpoint should be at a price of 1000+VAT+profit ( if any ) on it . Now the stockpoint is selling the goods at 1000 only , it means he is not collecting the TAX from the customers .

Conclusion : VAT is to be paid by your company from the company's pocket .

The company should tell the stockpoint to sell the goods at a price which is at least 1000+VAT charged by your company .

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anuj (auditor) (154 Points)
Replied 13 January 2012

dear harshal,thanks for reply.

price of rs 1000 is including vat.

whether stockpoint is liable to any vat/ or to file sale tax return. bcs he has to give bill of rs 1000/- to customers . should he give bill on the name of stockpoint or on the name of company.

Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 14 January 2012

There is no requirement of filing sales tax return for the stock point because he is only an agent and not a dealer . There are two options available to the stockpoint : issue bill in the name of the company OR not issue the bill . ...