E1 transaction

[Asked by Guest]

I am purchasing material from a manufacturer in Maharashtra and selling it to a customer in Gujarat, how do I use E1 transaction?

[YAGAY and SUN]

Dear Ajay,

Please check Section 3(a) and Section 3 (b) read with Section 6(2) in this regard.

Ask the manufacturer in Maharastra to sell the material to you and you without physically receiving the material endorse the Lorry receipt/Goods Receipt in favour of Customer in Gujarat.  The Gujarat buyer would provide you the C form and you would have to provide Manufacturer in Maharastra for E-1.

Regards,

Team YAGAY & SUN

(Indirect Taxation)

[rishi mohan]

In this 3 states/ parties are involved during the transportation of goods. And as per the state tax laws, upon entering each state, a central tax of 4 percent for each is state is payable. However if the goods are redirected or endorsed to a different party then to avoid multiple taxation, this sale in transit is applied.

[Arup Das]

Dear Mr. Ajay

Part-1 Between you and your manufacturer

1. For E-1 sale, you need to place an order to your manufacturer and advise him to do a Bill to ( your companys name) and ship to ( end customer name).

2. In the agreement between you and your manufacturer the title transfer should happen at ex-works basis.

3. Your manufacturer will raise an invoice by charging ED + CST at the rate of 2 percent , and also raise an Lorry Receipt, in the consignee address in the LR it will be mentioned as "Self"

Part-2 , Between you and your customer

4. In the agreement it should be clearly mentioned that title transfer will happen during movement of goods by way of endorsement of LR .

5. Once the material is shipped by your manufacturer you should collect and endorse the Original copy of LR in favour of the end customer.

6. After endorsement send the LR to your end customer.

7. The end customer will be able to collect the material on receipt of the endorsed copy of LR.

Exchange of Statutory forms.

1. You will be issuing C-forms to your Vendor.

2. the Manufacturer should issue an E-1 form to you.

3. you should collect C-form from your customer.

The products in trade should be registered in RC

Regards

Arupp Das

Company B purchase goods from Company A and both situated in a same state and sold goods to Company C which situated in a different state but Company A directly sent material to Company C at CST 2%. now this transaction is an E1 transaction??

[Arup Das]

Mr. Laha

In order to be an E-1 Transaction, first sale should be an inter-state sale. In the eg which you have given first sale is an intra state sale, so its not an E-1 sale.

Regards

Arupp

[YAGAY and SUN]

Dear Sukanta,

According to Section 6(2) of the CST Act, 1956 read with Section 3(a) and Section 3(b), the first sale should be interstate and subsequent sale may be in within State. Please check these sections in details to understand the whole gamut.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

AI Summary

E-1 transaction: sale-in-transit using endorsement of transport documents to effect title transfer and avoid multiple state tax.
E-1 transaction is a sale-in-transit mechanism where the first sale must be interstate; title transfer occurs on an ex-works basis and by endorsement of the original Lorry Receipt so the end customer takes delivery on the endorsed document. The intermediary issues C-form to the vendor, the manufacturer issues E-1 to the intermediary, and the intermediary collects C-form from the customer; an intra-state first sale does not qualify as E-1.