Central Sales Tax and VAT
Dibakar Ray
(Querist) 14 December 2010
This query is : Resolved
Dear All,
Whether any purchase from a territory which has a lower VAT and moving it to regions which has a higher vat and disposing them and realizing the difference can be termed as illegal or this is one of the lacuna of the system?
Can the state or the UT which has lost that portion of the revenue can make a claim on this?
Please provide case law in support of your contention.
Thanks & Regards,
Dibakar Ray
Khaleel Ahmed
(Expert) 14 December 2010
Not illegal.
No case law available.
ESTHERPRIYA
(Expert) 14 December 2010
The VAT depends on the state rate and there is no offence committed as such.
R.Ramachandran
(Expert) 14 December 2010
Dear Mr. Dibankar,
If any one purchases goods from a State paying higher VAT, and then takes it to a State where VAT rate is less, he is sure to lose money.
This is because, he cannot take any VAT credit of the tax paid by him while purchasing the goods.
Later when he sells the goods in the State where lower VAT is applicable, entire VAT collected by him is to be deposited to the VAT Department. In the bargain, what is the benefit for the person who does this transaction?
Dibakar Ray
(Querist) 14 December 2010
Dear all,
I agree with all of you. But the same thing applies when one person purchased the product from the state where low vat applies and sell it in the any state under CST billing. Then the profit is also accumulated.
Please provide case law.
Thanks & Regards,
Dibakar Ray
R.Ramachandran
(Expert) 14 December 2010
Dear Dibakar,
My answer fits for both purchase at higher rate of VAT and selling in another at lower rate of VAT, and purchasing at lower rate of VAT in one State and selling the said goods at higher rate of VAT in another State.
This is not the way to conduct the business.
In the process, the person trading will have no gain whatsoever. On the contrary he will be a big time loser since whatever VAT he paid in purchasing the goods will be his cost. On that cost if he wants to sell, and over and above that if he has to charge VAT thereon, the rates will not be competitive and others will not buy. Even if they buy, then whatever VAT is charged from them have to be paid to the Government. SO WHERE IS THE GAIN.
This is mainly because, input tax credit of VAT paid while procuring the goods is available only in the same State if the goods are sold within the State. In case VAT is paid in one State, credit for the same is not available in another State.
soumitra basu
(Expert) 20 December 2010
According to Supreme Court any person can arrange his affairs in such a way so that the tax burden to him is minimum. This is tax planning but not tax avoidance which is permissible.
