VAT Rate for contract manufacturing

[Pradeep Jain]

 Sir,

we have been  manufacturing of  Automotive Transmission  for car  under contract manufacturing for our Customer from our Hosur  ( TN state ) Plant.TVAT   at the rate of 5 percent ( Industrial Input) being paid on the AVTEC Purchase Order Value ( excluding FOC material value).  According to sales tax department of TN.   We are doing  job work  therefore VAT at the rate of 14.5 percent  , on the sale of said Automobile Transmission, is applicable .

Kindly advise.

Regards

Pradeep Jain

 

Please provide your opinion.

[DR.MARIAPPAN GOVINDARAJAN]

Whether you have got clarified in the above issue? If not please inform.

AI Summary

VAT classification dispute over contract manufacturing versus job work affecting applicable VAT rate on supplied goods. Whether manufacture of automotive transmissions under a principal's order is contract manufacturing eligible for input-rate TVAT on the purchase order value or is taxable as job work/sale attracting a higher VAT rate; facts show the supplier applied a lower industrial input VAT rate to PO value (excluding FOC materials) while the state tax authority treats the activity as job work subject to the higher output VAT.