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VAT query modified - urgent

Ruchir (Consultant) (50 Points)

31 October 2007

Our Client L&T manufactures RMC (exempt from ED) and sells them to client by transporting them to client site.

Can it separately charge the transportation expenses in the invoice, therebt levying VAT on the cost of goods, and service tax on transportation costs?

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5 Replies

nageswararao (Mgr - Commercial) (142 Points)
Replied 01 November 2007

As per your Case there are number of possiblities are there 1) Transportation owened by L&T 2) Transportation by Thired pary 3) Transportation arranged by Buyer. In first case there is no Service tax even transportation charges shown separately, its purely attract under VAT on transportation charges also. In second case there are two possiblities are there one is paid basis & other one is topay basis, in case of paid basis transportation charges shown in invoice attracts both VAT & Service tax also L&T liable to pay service tax; in case of topay basis the buyer is only liable to pay service tax. In third case there is no problem of VAT & Service tax because transportation engaged by Buyer himself. My phone no 099891 57666, Email: nageswararao.bommakanti @ ril.com Land: 0884- 2388343

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(Guest)

we have purchased paints for our mahinery manufacturing unit @ 12.5% from both manufacturer and dealer. and we are charging output VAT as 4%. can we avail ITC 12.5% or 4%? please explain.

nageswararao (Mgr - Commercial) (142 Points)
Replied 05 November 2007

You can eligble to take 12.5% as ITC for your raw material procurments.

CA. O.P. Agarwalla (C.A.) (2916 Points)
Replied 15 November 2007

As per section 2(44) of Assam VAT Act, 2003- "sale price" means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the dealer in respect of goods at the time of or before delivery of the goods other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged. As per Section 2(h) of CST Act, 1956- "sale price" means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged. In this context the case “[2006] 148 STC 0344- - Commissioner of Sales Tax, M.P. Vs. Flour and Food Limited” may kindly be referred, wherein it was held that- …that the definition of "sale price" in section 2(h) of the Central Sales Tax Act, 1956 makes it clear that when the cost of the delivery charges of any goods is recovered separately by the dealer from their purchasers then the dealer is entitled to claim deduction of the said charges on the ground that such charges do not form part of the sale price and fall in the excluded category of charges. In the case of the petitioner it has been held as a fact by all the authorities that handling charges, i.e., "Hammali" was charged separately and was also shown separately in the bills by the dealer. These charges are in the nature of cost of delivery of goods like coolie charges and hence has to be deducted from the turnover. Accordingly, I m of the opinion (with due respect to Mr. Nageswar) that, in case the seller is incurring any such expenditure (freight etc.) in delivery of the cost and he charges such cost separately, such cost /charges will not attract VAT.