Applicablility of VAT and CST

[Asked by Guest]

Dear Learned members,

This is with respect to the captioned subject.

In this regard, please take a note of the below mentioned facts of my case.

We have recently incorporated an LLP with our main business as manufacturing control panel for textile machinery and also providing them the necessary installation services.

Our place of business and registered office is in Gujarat. Further we have not started any business and very recently we have got our first order from a textile company based in Delhi.

Hence, my query is what are the taxes that I've to adhere to. I know that VAT will be applicable if we cross the threshold limit of Rs 5 lac turnover and for Service tax of ₹ 10 lacs but i'm confused about applicability of CST.

Plss help me regarding the same.

[YAGAY and SUN]

Dear SHINIL NAMBRATH

Suppose, if you buy some goods from Delhi then in the absence of CST Registration you would have to pay the CST @ 12.50% and if you get CST Registration then depending on the condition that the said goods are registered in your CST Registration Certficate, you can purchase such goods a concessional rate of Tax i.e. @ 2% against issuance of Form C under CST Act, 1956.

Central Sales Tax is applicable when sale/purchase transactions are conducted between two different States.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

 

[Ganeshan Kalyani]

You will register under Central Sales Tax. On Interstate purchasing you will have to bear concessions tax provided you issue Form C to the supplier. The list of items you intend to procure interstate need to be incorporated in the said certificate to enable you to apply for forms. Secondly on interstate sale if your interstate customer issues you form then you are suppose to levy cst @2% only, otherwise full tax that are prevailing in the receiving state for the product sold. Further you have not mentioned the State in which you would be operating your business. Anyway you also have to look for Entry tax. And with the progress of your business and increasing transaction their could comes applicability of other taxes. Therefore you may alarm your question here when your encounter any such issues later in taxation. Thanks and welcome.

[DR.MARIAPPAN GOVINDARAJAN]

There is no threshold limit for Central Sales Tax as that of VAT and service Tax. It is applicable when sale/purchase is transacted between two states.

Thank you all for your wonderful replies, it surely has helped me a lot.

AI Summary

Central sales tax applicability: interstate transactions require CST registration and Form C for concessional tax treatment.
Central Sales Tax applies to interstate sales and purchases and has no turnover threshold. CST registration and listing of procured items in the CST certificate are required to use Form C and obtain concessional tax treatment on interstate purchases; absent registration or Form C, higher tax applies. On interstate sales, receipt of Form C from the buyer permits charging the concessional CST rate, otherwise the full destination-state tax applies. Monitor VAT and service tax thresholds and potential entry tax as operations grow.