Transaction Value

[Krishan Gopal]

Dear Sir,Please advise, if the customer supply machinery free of cost under the rule 4(5) (b), would there any impact on calculating the transaction value of manufactured product.

[YAGAY andSUN]

Dear Krishan Gopal

The value of machine/tools/jigs/dies should be amortized.  Suppose machine can produce 1 Lacs products in its entire life and the value of machine is 5 lac, then, this Rs. 5 would be added in the cost of manufactured product, Excise Duty would be calculated on the total value but VAT/CST would be calculated on the taxable price net off Rs. 5 of the product.

Regards,

Team YAGAY & SUN

[Krishan Gopal]

Thanks sir,Further whether we have to mention tooling cost i.e. machinery cost in the face of sales invoice for calculating excise duty or any other method for invoicing. In our view sales tax will not be levied on tooling cost/Machinery cost.Regards,K Gopal

[YAGAY andSUN]

Dear Krishan Gopal,

You need to mention amortized cost of the each product  i.e. per piece on the face of the Invoice. Include it in the assessable value and charge the Central Excise Duty on that amount.  However, no VAT would be charged on the amortized cost.

Regards,

TeamYAGAY & SUN

(Indirect Tax Consultants)

AI Summary

Amortized Machinery Cost Must Be Included in Product's Excise Duty Value, Not VAT/CST, Per Central Excise Rules. A user inquired about the impact of customer-supplied machinery on the transaction value of a manufactured product under Central Excise rules. An expert advised that the value of such machinery should be amortized over its production capacity and included in the product's cost for excise duty calculations. However, VAT/CST should not include this amortized cost. The user further asked about invoicing methods, and the expert clarified that the amortized cost per piece must be included in the invoice's assessable value for Central Excise Duty, but VAT should not be applied to this cost.