Dealer Deposit -Taxable

[Tej Anand]

 

Good Morning ,

ABC company is a whole sale company and has dealers all over in India . It takes Rs.1 lac as dealer deposit ( Security ) from its new dealers appointed  . As per Maharashtra Act assessing officer says that dealer deposit taken from Maharshtra dealers should be taxable as per sales tax  .

From Sales Tax MAHAVAT site it says : Purchase Price shall include the amount paid by the purchaser by way of deposit whether refundable or not which has been paid whether by way of a seperate agreement or not , in connection with or incidental or ancillary to the said purchase of goods

We also return the dealer deposit once the terminates the dealership . So the dealer deposit in short is refund once the bussiness is terminated

Please help me to give your kind views and how can I save this tax since we have quite large amount of dealer deposit from Maharashtra .

Thanks & Best Regards

Tej Anand

 

 

[Surender Gupta]

Though your views and experience are welcome, in my understanding of the facts as narrated in the query, the security deposit in your case in not related to any sale of goods but it is related to appointment of franchise / dealer. In this department must fail to prove that this security is related to [ incidental or ancillary] to the said purchase of goods.

The term "said" is of much significant.

AI Summary

Dealer security deposit not part of purchase price may avoid sales tax if not incidental to the sale. Whether a refundable dealer security deposit is part of the purchase price hinges on its nexus to the purchase of goods; if paid solely for appointment or held as general dealer security and returned on termination, it is not incidental or ancillary to sales and therefore should not be treated as purchase price for sales tax.