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 and SUN]

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 and SUN]

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,

Team YAGAY & SUN

(Indirect Tax Consultants)

AI Summary

Amortization of tooling costs increases assessable value for excise while VAT is excluded from that amortized amount.
Amortize the cost of machinery, tools, jigs or dies over producible units and include the per piece amortized amount in the assessable value for central excise; disclose this per unit tooling cost on the invoice. VAT/CST should not be charged on the amortized tooling component and must be excluded when determining the taxable price for VAT/CST.