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Vat implication

Punit (Student) (97 Points)

28 November 2011

I am company, who is operating on franchise based model.

I sell two types of products, through my franchises. The products have VAT liablity of 5% and 12.5%.

I generate bills for the amount of stock transferred (sales) to my franchises.

However, my franchises are not registered under VAT. They make cash sales for which no invoices/bills are generated.

Would i as a company have any implications if my franchises are not genrating invoices/bills ? (Kindly provide reply for both cases: Assumption1: The turnover limit under VAT is not crossed:Assumption2: The turnover limit under VAT is crossed)

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5 Replies

RAJU (LEARNER) (1089 Points)
Replied 28 November 2011

Hi,

The relationship between the company & Franchisee plays an important role. If franchisee is an agent of the company, transfer of goods to agent is not a `sale` at all.

As far as Karnataka is concerned, the liability to payment VAT in case of such sales (through agents) will be on the agent.

However, if the transaction between the company & Franchisee is on principal-to-principal basis, there can not be any implecation on company for sales effected by the franchisee.

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DAYANANDA K N (ACCOUNTS EXCECUTIVE) (575 Points)
Replied 28 November 2011

You can not do stock transfer to frachise unless he is registered. To establish stock transfer as a seller you need obtain Form F from the frachise which he can provide only if he his registered.

Regards

Dayananda

RAJU (LEARNER) (1089 Points)
Replied 28 November 2011

The requirement of Form-F arises only if there is transfer to other State. For transaction within the State, Form-F will not come into picture.

Brajesh gautam (student) (232 Points)
Replied 29 November 2011

agree with Raju , f form is required for interstate

CS RAJESH C.CHOUDHARY (ASSISTANT MANAGER) (14607 Points)
Replied 30 November 2011

first you have to register for VAT. unless you register, how could you pay VAT? now there are 2 modes of registration: full VAT mode and composition scheme. if you register under full vat mode, then only you have to pay the original vat liability.but if you choose composition scheme (cs), you have to pay 1% on your sale. in order to get cs, these are the conditions:. 1) Dealer whose annual total turnover is between 2 lakh and 15 lakh. 2) Dealer who executes Works Contract. 3) Dealer who is either a hotelier or restaurateur or a caterer and or a dealer running a sweatmeat stall 4)Dealer producing granite metal and other than granite metal by using stone crushing machinery if your sell crosses 15 lakh limit, you have no choice but to register under full vat.if you already in cs and your sell is more than 15 lakh, then you will automatically fall in full vat mode. so, first you get registered. generation of bills/invoice is an easy method to prove your sell.it has nothing to do with turnover limit.