Stamp Vendor Turnover

[KUMAR Narasimhan]

Dear Sir / Madam,

A stamp Vendor who has taken stamp paper licensed from Govt and selling the Stamp Paper to his customers.

Question no 1:

He Sells close to 6 Crore worth of stamp paper in a Financial year and generated a profit of ₹ 6 Lakh from it, meaning 1% is profit.

In this case should he needs to do a Tax Audit for the respective Financial year?

Question no 2:

He deposited the worth of 5.3 crore cash deposit ( Collected the cash from Customer) to purchase the stamp paper.

Shall we show this transaction as purchase and sales, meaning as a Trade or we can show this as Commission amount alone to prepare the Financial.

Please clarify

[ARVIND JAIN]

Option 1 seems to be safer as the cash deposit amount is high.

AI Summary

Tax Audit risk: substantial cash collections by a stamp-paper vendor warrant treating receipts as trading with robust documentation. A licensed stamp-paper vendor with large receipts but low net profit questioned whether a statutory Tax Audit is required and whether large cash collections should be shown as purchase and sale (trade) or as commission income. The advisory recommends treating the transactions as purchase and sale (trading activity) and maintaining transparent books and documentation, noting that substantial cash deposits make the trading presentation the safer compliance posture.