What rate of Vat applicable Goods supplied within India but Sales Proceeds received from aborad - Foriegn Currency?

[Ravi chandran]

Dear Sir

We are CNC machine Dealer our office is situated in Chennai (Tamil Nadu)

We have received a purchase order from our customer at Taiwan to supply of UCAM table for 

CNC machine, the order value is in USD dollars, later they advised us to supply the Goods to

their customer in Tamil Nadu. We already received advance from our Taiwan Customer in

foreign Currency (US Dollars as per the Purchase Order)

Now we have to supply the Goods as per our customer advise to their customer in Tamil Nadu,  

1. In whom favour (Name)  should we raise the sales Invoice?

2. In which currency should we raise the sales Invoice - whether in INR or USD?

3. Whether Local Sales Tax (VAT 5%) is applicable or Not? if not under which gound we can

     avail tax exemption?

Kindly Advise Imtly

Thanks & Regards

T. Ravi Chandiran

[YAGAY and SUN]

Dear Ravi,

This transaction is coming under the purview of Deemed Export.  In the deemed export, goods don't leave the country but for the same goods payment will be received in foreign currency.

1) Invoice will be issued 'bill to' , 'ship to' basis.

2) you will deliver the goods on a delivery note to the Indian party and commercial invoice will be sent to foreign party and the invoice will be raised in foreign currency.

3) VAT @ 5% will not be chargeable since this transaction is coming under the purview of deemed export though tax  authorities may raise objections.

Further, you need to get it crossed checked from your counsel.  Please also check the definition of Deemed Export in the foreign trade policy.

Best Regards,

Pradeep Khatri

[Balasubramanian Natarajan]

Dear

1.The conccept of deemed exports is applicable  under the Central ecise and not under TNVAT.

2.The sale will be trated as Local sale as it does not occasion the movement of goods to a foreign drdtination

3.It is also not covered under Section 5 of the CST Act.

4.It is immetrial who has placed the order and in which currency the payment is received.

5.The place of delivery is critical and in this case it is with in the State and hence will be a local sale

6.The billing can be in  Indian currency for easy filing of Vat returns , though th epayment is in foreign currency.

7.The coomercial invoice can be raised on the Foreign buyer with consignee as Party in Tamilnadu.

Trudt this answers your query

balasubramanian n

Trichy -23.02.2012

AI Summary

Deemed export treatment may exempt VAT where payment is received abroad, but state VAT may treat it as a local sale.
Whether VAT applies where goods are supplied within India but payment is received abroad depends on competing characterisations: one view treats it as a deemed export allowing a commercial invoice to the foreign buyer, delivery to the Indian consignee, invoicing in foreign currency and asserting VAT exemption; the counterview treats it as a local sale because delivery occurs within the State, meaning State VAT applies and deemed export concepts under central excise are inapplicable.