Two companies in different states

[Amit Kumar]

Hi,

We have two partnership firms in two different states(Delhi, UP). One of the company in Delhi gets some orders. Can other company (in noida) fulfill this order. What kind of taxes should be paid by both the companies. How to minimize taxes?

Pavan

[Madhukar N Hiregange]

What type of order is important,

If goods then VAT/CST

If services then the service provider is to charge Service tax if above 10 lakhs.

[Amit Kumar]

Let's assume if we provide service and we charge a minimal service fee like 1 RS or so. Is it incorrect to charge too minimum service charge?

Also as soon as we receive order in company A, we get product packed from company B and delivered to company A. Please note that both companies are registered in different state. I guess company B will have to pay VAT/CST + Service Taxes. What taxes will company A pay?
 

AI Summary

Inter-state tax treatment: classify supply as goods or services to determine VAT/CST or service tax liabilities across related firms. Inter-state tax treatment depends on whether the transaction is goods or services: goods attract VAT or CST when treated as inter-state sales, while services attract service tax when the provider's taxable turnover exceeds the statutory threshold. When related firms split functions (order receipt, packing, delivery across states), each firm's liability follows the nature of the supply it performs; token charges do not alter tax character and proper invoicing, place-of-supply determination, and compliance are required to establish who must discharge VAT/CST or service tax.