Applicability of State VAT or CST

[manish dalwadi]

Query:

Ours is Gujarat base Engineering goods manufacturing company say ‘X’ and we export 99% of our final product, and no finished goods sale in Gujarat (except some scrap generated during manufacturing), procures raw material from Maharashtra by placing Order on Maharashtra Supplier say “A”, and instruct him to deliver the goods directly to a job-worker located in Maharashtra say ‘J’ without bringing the raw material in Gujarat. Raw Material supplier ’A’raises Invoice on us mentioning buyer as ‘X’ and consignee as ‘J’ after charging 2% CST against Form-C.

Job-worker ‘J’ sends us the processed raw material to us ‘X’ in Gujarat after charging Job work charges.

1. We have been advised that we cannot purchase the goods against From-C as the delivery does not occasion the movement of goods from Maharashtra to Gujarat. Is this correct?

2. Whether CST charged by supplier ‘A’ of the raw material is correct? Or we have to pay Maharashtra VAT ?

3. Whether the transaction between our company and job worker falls under works contract?

4. What should we do to minimize tax burden ?

I seek your valuable advice in the matter, do reply please.

AI Summary

Interstate movement determines tax applicability; absence of movement means intrastate VAT applies, not CST, for delivery to in state job worker.
Where raw materials are delivered by a supplier to a job worker located in the same State, there is no interstate movement and the sale cannot properly be treated as interstate for CST/Form C purposes; the supplier should charge the State VAT where delivery occurs. Whether the buyer's arrangement with the job worker is a works contract or a job work service depends on contractual terms, transfer of property and factual conduct and requires detailed review of documentation.