Applicability of VAT or CST

[PRADEEP KUMAR]

We have received order from Chennai to deliver goods at Surat, whether we have to charge VAT or CST on said transaction. We are situated at Ahmedabad. We will insert on invoice copy, Conisgnee name with Surat location and buyer's name/billing address will be Chennai location. Pls. guide whether to charge VAT or CST on stated transaction??

[Guest]

It is immaterial in which State the property of goods passes to the buyer. - Oil India Co. Ltd. v Superintendent of Taxes (1975) 3 SCR 797 (SC) = AIR 1975 SC 887. Movement of goods should be incident of sale and should be necessitated by the contract of sale and this be inter-linked with sale of goods - Kelvinator of India Ltd. v State of Harayna 1973 32 STC 629 (SC). Goods must physically move from one State to another - There shoudl be physical movement of goods from one State to another. Such movement must be inextricably connected with sale.

[V K]

Dear Mr Pradeep KIndly note that, it is clearly mentioned in the CST ACT-1956 that "movement of goods" will decide ,whether the sales is covered under inter state trade or with in the state. In this particular case buyer is in chennai , but the material is to delivered in the state of gujrat only. (i.e state of origin & destination of goods are same )so the sales will not cover under section -6(2) ( sale in transit)

[Guest]

Dear Vikas, In my earlier reply, I had neither said that it would be sale in transit nor it local sale. Please go through both the case laws mentioned in detail. Even in the below mentioned case law it is clear what was mine answer. Definately, it would amount to a VAT sales as the good will remain in the same State. Movement of goods should be incident of sale and should be necessitated by the contract of sale and this be inter-linked with sale of goods - Kelvinator of India Ltd. v State of Harayna 1973 32 STC 629 (SC). Goods must physically move from one State to another - There shoudl be physical movement of goods from one State to another. Such movement must be inextricably connected with sale.

[V K]

Dear Mr. Pradeep Khatri. My reply was only for the question asked by Mr Pradeep Kumar. It was not towards to your answer. I feel sorry if you heart by this . Regards, vIKAS kAPOOR

[PRADEEP KUMAR]

When the terms of contract is delivery Ex-Factory(FOR)and subsequently the Tamilnadu buyer instruct to deliver the material at his projectsite in Gujarat(Within the state)whereas we(the manufacturer)are not concerned with the consignee at all.Payment of the material is being moved and deposited at Chennai.What is the legal status for us (the manufacturer seller)if we have charged CST(Against Form C) in all the invoices.(1)If VAT is chargeable then the buyer being not registered in Gujarat,can we raise TAX invoices?

[PRADEEP KUMAR]

When the terms of contract is delivery Ex-Factory(FOR)and subsequently the Tamilnadu buyer instruct to deliver the material at his projectsite in Gujarat(Within the state)whereas we(the manufacturer)are not concerned with the consignee at all.Payment of the material is being moved and deposited at Chennai.What is the legal status for us (the manufacturer seller)if we have charged CST(Against Form C) in all the invoices.(1)If VAT is chargeable then the buyer being not registered in Gujarat,can we raise TAX invoices?

[PRADEEP KUMAR]

When the terms of contract is delivery Ex-Factory(FOR)and subsequently the Tamilnadu buyer instruct to deliver the material at his projectsite in Gujarat(Within the state)whereas we(the manufacturer)are not concerned with the consignee at all.Payment of the material is being moved and deposited at Chennai.What is the legal status for us (the manufacturer seller)if we have charged CST(Against Form C) in all the invoices.(1)If VAT is chargeable then the buyer being not registered in Gujarat,can we raise TAX invoices?

[Guest]

You can't issue tax invoice to unregistred dealer, you will have to issue retail invoice for the same

AI Summary

Movement of goods determines tax classification; delivery within the seller's state indicates VAT rather than CST applicability. Tax classification depends on whether the physical movement of goods is necessitated by and inextricably linked to the contract of sale. If goods remain physically within the seller's State despite the buyer's billing or payment address elsewhere, the transaction is treated as an intra state sale subject to VAT; only where goods physically move across State boundaries as part of the sale will CST apply. Contractual delivery terms and consignee instructions determine the operative destination for tax purposes.