PAPER ON

At:
S.P. Jain Institute of
Management & Research 1
.
 INTRODUCTION
• Direct and Indirect taxes are governed
by constitution mandate.

Sales tax – Indirect tax

I) Inter-state sale – Union of India
II) Local sales – State jurisdiction.

• Article 246 of the constitution provides

the power to union of India and States
Continue…
2
 BACKGROUND
Constitution of
India
Article 246

Seventh
Schedule

List I List II List III

Union list State list Concurrent list
(Entries 1 to 97) (Entries 1 to 66) (Entries 1 to 47)

Entry 92A Entry 54

Continue…
3
 BACKGROUND

Entry 92A: Taxes on the sale or purchase of goods

other than newspaper where such sale or purchase
takes place in the course of interstate trade or
commerce.

Entry 54: Tax on sale or purchase of goods other

than newspaper subject to the provision of entry 92A
of list 1.

4
 HISTORY
• State of Madras first brought ‘Sale’ to sales tax in its simplest
form.

• Prior to enactment of CST Act, 1956 more than one State stake
their right to levy tax on singular transaction.

• Attempts were made by States to levy tax on certain transaction

as goods, which does not fall under the Sale of Goods Act.
(prior to 46th constitution amendment)

• 46th constitution amendment – Article 366(29A) – widens the

scope for levy of sales tax by imposing tax on deemed sale.
Inserted in 1982.
• Today sales tax is a major source of revenue for States.

5
 SALES TAX SCHEME
PRE-
PRE-VAT ERA.
• Cumbersome.

• Multiple rates leading to classification dispute

• Devoid of uniform provision under the State Act

• Different rate of tax among the States even for same commodity

• Difficulties in planning all India business operation

• Frequent changes through issuance of notifications.

• Cascading effect on price of commodity

• Compulsion on traders to distance themselves from the

exposure of statutory compliance
6
• Susceptible to various corrupt practices.
STATE LEGISLATURE ’S POWER RELATING TO
SALES TAX ON GOODS.
• To prescribe an appropriate rate of basic local tax
for levy and collection

• To provide for levy of surcharge, turnover tax,

additional tax, special additional tax etc.

• To prescribe the incidence of levy either on sale or

purchase.

• To extend any tax benefit to manufacturer, dealer

involved in sales or purchase of goods for public
welfare purposes etc.

• To prescribe any condition/s, procedure,

documentation etc. 7
 Background on VAT in India.

Empowered committee of State finance ministries
under the chairmanship of Dr.Asim Dasgupta
renewed their commitment to the introduction of
VAT from 1st April 2005.

Vat was introduced by most of the States with effect

from 1st April 2005.

Presently,except U.P. all the States have adopted Vat

Vat is a tax levied on the value added along different

stages of production and distribution of a commodity

8
 Background on VAT in India.

Vat is a multi-point sale with set-off for tax paid on
purchases

Vat does not have cascading effect, due to set-off

mechanism.

Total burden of tax is fully borne by the domestic

consumer of goods.

No Vat is charged on goods exported outside India.

Vat in many respects is equivalent to a last point

retail sales tax.

9
 DIFFERENT SCHEMES FOR LEVY OF
TAX

A. Single point scheme:

• Levy of tax at the point of first sale.
• Does not permit levy of tax at every stage of
any local transaction namely resale.
• Loss of revenue due to difference of sale
price between first sale and ultimate sale to
consumer.
• Necessitated to introduce resale tax due to
infirmity of scheme.

10
 DIFFERENT SCHEMES FOR LEVY
OF TAX
B. Multi-point scheme:
• Levy of tax at every stage of sales.
• Cascading effect on the price of the goods depending
on the number of sequential sale of that particular
commodity.

C. Double point of levy:

• Levy of first sale and last sale of goods
• Difficult to keep track on the continuity of any
transaction to identify first sale and last sale

11
DIFFERENT STAGES OF VAT:
STAGE I STAGE II
Raw Material producer Manufacturer
Sale value…..Rs.1000/- Sale value……Rs.2000/-
Stage 2
Vat @10%.....Rs.100/- Vat @10%.....Rs.200/-
Vat payable ..Rs.100/- Vat payable….Rs.100/-
(Rs.200-100)

Stage 3

STAGE IV STAGE III

Retailer Stage 4 Wholesaler
Sale value…….Rs.4000/- Sale value……..Rs.3000/-
Vat @10%......Rs.400/- Vat @10%.......Rs.300/-
Vat payable…..Rs.100/- Vat payable…….Rs.100/-
(Rs.400-300) (Rs.300-200)

Total Vat collected 100+100+100+100=400 12

 COMPARATIVE ANALYSIS - PRE-
PRE-VAT AND POST-
POST-VAT REGIME.

A. Manufacturing Activity:
Sr. Particulars Pre-Vat Post-Vat
No
1. Raw material 100.00 100.00
2. Tax on raw material 5.30* 12.50
3. Mfg. cost + margins 75.00 75.00
4. Mfgrs selling price 200.00 200.00
5. Sales tax / Vat @15.3% 12.5% 30.60 25.00
6. Invoice price inclusive of tax. 230.60 225.00
7 Total tax component 35.90 25.00
8 Tax as a % of Invoice price 15.57% 11.11%

Note: * Retention under the BST Act was 3% plus TOT and SC.
13
 COMPARATIVE ANALYSIS - PRE-
PRE-VAT AND POST-
POST-VAT REGIME.

B. Trading Activity:

Sr. Particulars Pre-Vat Post-Vat Remarks

No
1. Sale value by 100.00 100.00
manufacturer
2. Sale tax / Vat 15.30 12.50
15.3% / 12.5%
3. Wholesaler’s price 150.00 146.00
(with 30% margin)
4. RST / VAT 0.75 18.25
0.5% / 12.5%
5. Gross sales price 150.75 164.25

6. Vat payable by wholesaler 0.75 5.75 (18.25-12.5)

14
Continue..
 Comparative analysis - Pre-Vat and Post-Vat regime.
Sr. Particulars Pre-Vat Post-Vat Remarks
No
7. Resale by retailer 180.90 197.10
(with 20% margin)
8. RST / VAT 0.90 24.64
0.5% 12.5%
9. Cost to consumer 181.80 221.74
10. Vat payable 0.90 6.39 (24.64-18.25)
11. Total tax component 16.95 24.64
12 Tax as %age of final 9.32% 11.11%
price
Tax is higher @1.79%
Note: Above table do not take into account input credit for tax paid on
capital goods and expenses involving material debited to P&L A/c. 15
Different version for Imposition of Vat:
a) Production version: Allows deduction of all purchases
of raw material but no deduction for capital assets such
as plant and machinery

b) Income version: Allows deduction of all purchases of

raw material plus credit is given for depreciation on
capital assets like plant and machinery.

c) Consumption version: This is the Indian version of

imposition of Vat. Here credit for all purchases plus
capital assets is available.

Among the above three version the consumption method

is widely used in most of the countries.
16
 Computation of Vat in three different ways:
1.Value Addition

1st stage 2nd stage 3rd stage total

Rs. Rs. Rs. Rs.
i) Overheads 2250 4750 2400 9400
ii) Profit 250 250 100 600

iii) Value added 2500 5000 2500 10000

iv) Say Vat 250 500 250 1000

@10%

17
 Computation of Vat in three different ways:
2. Deduction of Sales value

1st stage 2nd stage 3rd stage total

Rs. Rs. Rs. Rs.
i) Sales value 3500 8500 11000 23000
ii) Purchase 1000 3500 8500 13000
value
iii) Value 2500 5000 2500 10000
addition
iv) Vat 250 500 250 1000

18
 Computation of Vat in three different ways:
3. Deduction of tax component

1st stage 2nd stage 3rd stage total

Rs. Rs. Rs. Rs.
i) Sales value 3500 8500 11000 23000
ii) Tax on Sales 350 850 1100 2300

iii) Purchase 1000 3500 8500 13000

value
iv) Tax on 100 350 850 1300
purchase
V) Vat (ii – iv) 250 500 250 1000
In India last computation method is used. 19
 Salient features of White Paper on Vat
released on January 1, 2005.

• Vat enactment with reference to Entry 54 of VII schedule

(State list) to Article 246 of the constitution.

• Prevailing State sale tax laws are replaced by a new

enactment “State Value Added Tax Act”

• Provides for levy of tax at every stage of sale or resale. It’s

implication is restriction on the value of addition on such
goods.

• Vat provides an inbuilt mechanism for tax credit (set-off),

which paid at the previous stage. To be known as ‘Input Tax
Credit’ (ITC).
20
Continue…
 Salient features of White Paper on Vat
released on January 1, 2005.

• Manufacturers as well as traders will be entitle to ITC

pertaining to local sale or inter-state sales, irrespective of the
event of its utilization or subsequent sales.

• ITC shall be available against local tax paid purchase

document and not on CST tax paid invoice.

• ITC shall be available on closing stock of goods as on 31st

March, 2005 towards local purchases.

• For Stock Transfer – ITC allowed in excess of 4% of local

tax amount.
21
Continue…
 Salient features of White Paper on Vat
released on January 1, 2005.

• Where the goods are exported out of the country, refund in

full for local tax paid will be made within three months.
Similar exemption and refund will be granted to SEZ and
EOU units.
• Unadjusted ITC will be permitted to carry forward to next
year.
• Local purchase of capital goods – Traders and
Manufacturer allowed to claim ITC and adjusting it over a
maximum period of 36 equal instalments.
• Negative list of capital goods would not be eligible for ITC.
Similarly interstate purchase would not qualify for credit.

22
continue…
 Salient features of White Paper on Vat
released on January 1, 2005.

• Applicable rate of tax to be categorized in minimum

numbers i.e. 0%, 1%, 4%, 12.5%. Items like liquor, lottery
tickets, diesel, petrol, aviation turbine fuel and other motor
spirit to remain outside the Vat scope.
• Consolidated rate recommended, so as to abolish other levies
like surcharge, TOT, additional surcharge, special additional
tax etc.
• Levy of entry tax to be abolished, otherwise same to be made
vatable.
• Phasing out of the CST levy.

23
continue…
 Salient features of White Paper on Vat released on
January 1, 2005.
• Registration to be made compulsory for a dealer having
annual turnover of sales above Rs.5 lacs. Voluntary
registration shall be permitted.

• Dealers having annual T.O not exceeding Rs.5 lacs shall not
be liable to Vat payment. State shall have discretion to fix
threshold limit within Rs.5 lacs.

• Small dealer having annual turnover not exceeding Rs.50

lacs and liable to pay Vat may opt for paying tax on
composition basis at a small percentage, however, such
dealer will not be eligible for ITC benefit.
24
continue…
Salient features of White Paper on Vat released on January 1, 2005.

• Registration procedure to be simplified and tax

payer to be allotted TIN number – 11 digit Tax
payer identification Number will be allotted.

• Importance for self assessment - Audit on random

basis – Audit official should be other than the
person in charge of tax administration and tax
collection.

• Existing incentive scheme can be continued in the

manner deemed appropriate by the States after
ensuring that Vat chain is not affected.
25
continue…
Salient features of White Paper on Vat released on January 1, 2005.

• Penal provisions not to be more stringent

than existing Sales tax laws of the States.

• Sales against Declaration forms will be

discontinued.

• Proposal for Vat on imports.

26
continue…
 General guidelines on some of the Important
definitions under MVAT Act, 2002: (Definitions
are more or less same in other states)
i. Business: Includes business without profit motive –
frequency of transaction will decide whether business or
not. Depends on the facts and circumstances of each case. It
can be said that any thing sold under the Sky which is
movable or intangible by a dealer forms part of business

ii. Brand Name: milk, curd exempted under schedule A to the

MVAT Act, however when sold under a brand name same
shall be liable to levy of Vat.

iii. Capital Assets: As defined under section 2(14) of Income

Tax Act, 1961.

27
Continue….
 General guidelines on some of the Important definitions under
MVAT Act, 2002: (Definitions are more or less same in other states)

Dealer: A person who buys or sells goods in the State for

commission, remuneration or otherwise. It includes State Govt.
or Central Govt., local authorities, societies, clubs or other
association of persons which buys and sells goods to its
members.

v. Declared Goods: As defined under section 14 of the CST Act,

1956, declares certain goods of special importance in interstate
trade or commerce. Section 15 of the CST Act provides
restrictions and conditions in regard to taxation of declared
goods within the State.

28
Continue….
 General guidelines on some of the Important definitions under
MVAT Act, 2002: (Definitions are more or less same in other states)

vi. Goods: means every kind of movable property

including live stocks, growing crop, grass and trees
and plants including produce thereof. Goods, includes
property in such goods attached to or forming part of
land which are agreed to be severed before sale or
under the contract of sale. However, it does not
include newspaper, actionable claims, money,
stocks, shares and securities and lottery tickets.
(borrowed from definition of goods as provided under
‘Sale of Goods Act’)

29
Continue….
 General guidelines on some of the Important definitions under
MVAT Act, 2002: (Definitions are more or less same in other states)

vii. Manufacture: Manufacture’ includes producing,

making, extracting, altering, ornamenting, finishing or
otherwise processing, treating or adapting any goods.
However, every process on goods does not amount to
manufacture. Even after process if the resultant goods
remains and retain the characteristic of the original
goods then it won’t result into manufacture.

30
Continue…
 General guidelines on some of the Important definitions under
MVAT Act, 2002: (Definitions are more or less same in other states)

viii.Place of Business: Includes warehouse,

godown or other place where dealer stores his
goods and also any place where books of
accounts are kept.

ix. Purchase Price: Sum charged by seller for

goods before delivery but does not include
insurance for transit or installation, if
separately charged.

31
Continue…
 General guidelines on some of the Important definitions under
MVAT Act, 2002: (Definitions are more or less same in other states)

x. Sale: Transfer of property in goods for cash or

deferred payment or other valuable consideration.
• Characteristics
a) Two persons capable to enter into contract.
b) Agreement or contract whether express or implied between
two persons.
c) Transfer of property in goods from one person to another
under contract of sale.
d) Transfer in same goods for which it is agreed.
e) There should be clear implied or express intention to sell or
buy the goods and
f) For valuable consideration
If any one of the above ingredient is missing then the transaction is not a32sale
Continue…
General guidelines on some of the Important definitions under
MVAT Act, 2002: (Definitions are more or less same in other states)

Following transaction is covered under definition of

sale (Due to 46th constitution amendment).

a) Non-voluntary transfer of goods for consideration.

b) transfer of property in works contract
c) delivery of goods on hire purchase or instalment
payments
d) transfer of right to use goods
e) supply of goods by unincorporated association or body
to members for consideration
f) supply of food or beverages by way of or as part of
service.

However, mortgage, pledge, charge, hypothecation of

goods does not amount to sale.
33
General guidelines on some of the Important definitions under
MVAT Act, 2002: (Definitions are more or less same in other states)

xi. Sale price: Any sum charged before delivery of

goods but does not include insurance for transit
or installation, if separately charged. (similar to
the definition of purchase price)
Deposit in connection or incidental or ancillary
to the sale or in distribution of the goods shall
form part of sale price.

34
 WORKS CONTRACT

Introduction

Due to the 46th constitution amendment

certain transactions are considered as deemed
sales, list of same is given under the definition
of sale in earlier slide. Of the six types of
transactions covered under clause 29A of
Article 366, sub-clauses b and sub-clause f
consists of indivisible composite contract. Here
Vat could be levied on the value of the supply
portion of the contract.
35
 WORKS CONTRACT

Few of the Important points in relation to composite
contract.

1. Vivisection of composite contract is not permitted for

levy of service tax, although by deeming fiction of law,
sales tax may be levied on supply portion if covered
under sub-clause b and f of clause 29A of Article 366 of
the constitution.

Daelim Industrial Co. vs. CCE, 2003 (155) ELT 457

(Delhi-Tribunal) ,M/S L&T Ltd. Vs. CCE Cochin, 2004
(174) ELT 322 (Tribunal)

36
 WORKS CONTRACT

Few of the Important points in relation to composite
contract.

2. The 46th constitution amendment is valid only for those

entries in three lists in the seventh schedule where ‘tax on
sale or purchase of goods’ appears. Effectively, the
constitution amendment is applicable only with respect to
sales tax/Vat laws and not for any other law. Therefore, for
purposes outside sales tax/Vat, the concept of indivisible
composite contract continues to be valid. Apex court in
BSNL case held that even after the 46th constitution
amendment it is impermissible to split composite
transaction except in the case of works contract and supply
of food and beverages as part of the service in restaurants
and hotels for sales tax/Vat.
37
 WORKS CONTRACT

3. Transfer of property may be incidental or ancillary

to the main purpose of rendering service, and then
the entire transaction would be regarded service
contract.

E.g. in the contract for service of repairs, use of

component could be treated as incidental to the main
purpose of the contract which is rendering of service..

38
 WORKS CONTRACT

4. Unless, the transaction in truth represents two

distinct and separate contracts and is discernible as
such, then the State would not have power to
separate agreement to sell from the agreement to
render service and impose tax on sale.

39
 WORKS CONTRACT

5. Similarly, some activity may be undertaken as

incidental to a sale transaction, but such activity
would not be regarded as a transaction separate from
sale. In other words, if service is only incidental to
sale it would form part of sale.

40
 DISTINGUISHING BETWEEN COMPOSITE
CONTRACT AND MULTIPLE CONTRACTS.

Composite Contract Multiple Contract

Customer is interested in final outcome Customer is expecting several
of the contract independent outcomes.

The constituent elements are Integrally Each constituent elements would be

connected and interdependent. given a tax treatment appropriate to it.

Incidental and ancillary constituent to -

the main objective of the contract are
not given separate tax treatment. Such
incidental elements are treated as
means of attaining the ultimate object
of the contract.
41
CONSTRUCTION CONTRACT

Almost all States has uniformly provided for considering the contract
price as GTO.

Composite contract of material and labour – Apex court in Gannon

Dunkerley held that building contract is one entire and indivisible.

Some of the States has notified list of contracts that are classified as
construction contract.

Computation of Contract for discharge of Vat liability.

Rate of tax applicable on goods, shall be in the form in which goods gets
transfered during the execution of contract.

Composition scheme in lieu of payment of Vat exist in almost all States.

Discharge of tax under composition scheme can be opted for even part of
the contract under MVAT Act.

Neither Vat levy nor any service tax levy - on sale of flat.

42
SUB-
SUB-CONTRACTING UNDER WORKS
CONTRACT.

No right to tax sub-contractor and principal
contractor together under Vat for execution of
works contract.

Issuance of declaration will absolve other party

from Vat payment.

Where whole of the contract is executed by

sub-contractor and tax is borne by him , then
principal contractor not liable on differential
amount.

43
DEDUCTION OF TAX AT SOURCE
UNDER THE VAT LAW

TDS will apply provided works contract exceeds
stipulated limit – Under MVAT Act the limit is
Rs.5 lacs qua contractor.

Under MVAT Act rate of TDS is 2% in case of
job executed by registered dealer and 4% in case
of unregistered dealer.

Provision of TDS not applicable if payments are
made to sub-contractor.

Quantum of deduction shall not exceed the
quantum of tax payable.

Interstate works contract – TDS provision not
applicable 44
LEASE TRANSACTION (TRANSFER OF RIGHT TO
USE GOODS)

Applicable after insertion of sub-clause d to clause

29A to Article 366

Tax payable on lease rental amount charged on
moveable property.

Rate of tax – as applicable under the State Sales tax
Act.

Situs of Sale will be that State;
 Where the agreement for transfer of right to use goods had
been executed within that State provided goods are available
when the transfer took place.
 For Oral contracts situs of the transfer may be where goods
are delivered.

Possession and control of moveable property is the
essence to determine the taxability of transaction.
45
INTER-
INTER-STATE SALE

Occasions the movement of goods from one State to
another.

Appropriate State to collect tax – the State where
movement of goods commences.

Where the movement of goods commences and
terminates in the same State it will not be inter-state
sale.

Sale by transfer of documents of title to goods during
their movement from one State to another.

In case of unascertained or future goods, at the time of
their appropriation to the contract of sale by the seller
or by the buyer.
• Rate of tax on goods shall be State rate of tax or 3%
against Form ‘C’. 46
SALE OR PURCHASE OF GOODS IN THE
COURSE OF IMPORT OR EXPORT

Sale or purchase of goods outside the Indian territory

Transfer of documents of title to the goods after the
goods have crossed the custom frontiers of India.

Import of goods into the territory of India.

Transfer of documents of title to the goods before it
crosses the custom frontiers of India.

Last sale or purchase of any goods preceding the sale
or purchase occasioning the export – provided such last
sale or purchase complies with such export – Against
form ‘H’.

47
BRANCH TRANSFER

Transfer of goods to own place in another
State.

Transfer of goods to agent or principal

Transfer of goods should not be against

pre-determine sale.

Transfer against Form ‘F’.

48
Queries on Vat:

?

Q1. M/s Ever Forward Ltd , a building
contractor, constructs two storeys building
for a developer M/s Rosewell developer in
the year 1980 for a consideration of Rs.30
lacs inclusive of material and labour. M/s
Ever Forward Ltd spent Rs.20 lacs for
material, Rs.8 lacs for labour and
overheads. On what amount M/s Ever
Forward Ltd is liable to pay Sales tax?
49
Queries on Vat:

?

Q2. M/s Hi- Tech Enterprise is manufacturer of
Industrial machineries. State rate of tax on such
machine is 4%. Machines are sold locally as well
as sold outside the State. Raw material is procured
from outside the state and also from within the
State. Certain capital assets like computers are
procured locally, which are for factory and office
of PQR. M/s PQR seeks your advice to compute
the tax liability based on following data for the
month of Feb,08.

continue..
50
 Income Side Expense side
(i) Local 1,00,000
(i) Local sales 5,00,000 purchases
20,000
Tax @ 4% Tax @ 4%
4,000

(ii) Interstate 10,00,000 (ii) Local Purchases 5,00,000

sales Tax @ 12.5%
60,000
Tax @ 3% 30,000
(Form’C’)
(iii) Interstate
4,00,000
(iii) Rent on 5,00,000 purchases
Machines
(locally) …… Tax @ 3% (Form’C’) 12,000
Tax @.....
1,50,000
(iv) Leased rent 6,00,000 (iv) Computers
of Un-operative 6,000
Tax @ 4%
Plant
Tax @ ……. (v) Hire charges for 10,000
……
Fork lift

Tax @ 12.5% 1,250

51
Queries on Vat:

?

Q3. (i) Mr. Mover transfers his residence from Mumbai
to Pune. He sells all his movable assets like tables,
chairs, sofa-set etc. including some of the white goods
for a price of Rs.6 lacs.

(ii) Due to transfer of residence Mr. Mover wants to
transfer his textile business to M/s Opportunist
Enterprises with all movable assets including rights,
title and interest in contracts, receivable, goodwill etc.
M/s Opportunist will also take all liabilities along with
employees earlier employed with Mr. Mover in his
textile business.

What will be tax implication on Mr. Mover in relation
to Vat?
52
Queries on Vat:

?

Q4. Mr. Nuksan wants to sale its factory
land along with machineries embedded to
the land. Whether Mr. Nuksan has to pay
Vat on consideration received towards
machinery or on total consideration
inclusive of factory ?

53
Queries on Vat:

?

Q.5. M/s Devta Ltd enters into separate
contracts with M/s Danav & Co for
purchase of equipment and for supervision
of erection, start-up, putting into
commission etc of the equipment. Whether
Devta Ltd will be liable to pay Vat on total
amount payable to M/s Danav & Co ?

54
Queries on Vat:

?

Q6. M/s XYZ is into the business of drying
raw tobacco. As part of service, XYZ
provides packing materials, which are used
to supply dried tobacco in packed form to
the customer. Whether XYZ will be liable
to pay Vat on packing material?

55
Queries on Vat:

?
Q7. A large Indian Corporate house enters into
collaboration with a foreign company for
manufacturing certain products for its Indian
Company. The agreement provides that foreign
company to provide drawings, designs etc. Foreign
company also has to give training to the employee of
the said Indian company apart from imparting
technical assistance relating to all matters falling within
the scope of agreement. Whether the said transaction is
liable to Vat or Service tax or none?
56
Queries on Vat:

?
Q8. Whether renting of property and
hiring of furniture and fixtures under
separate contract for separate prices are to
be taxed as a single transaction?

57
Queries on Vat:

?
Q9. M/s Virtual Ltd contractor provides
the equipment to Port Trust on dedicated
basis and such equipment is also run byM/s
Virtual Ltd , the owner of the equipment.
The question here is whether the activity is
taxable as transfer of right to use goods?

58
Queries on Vat:

?
Q10. . M/s MaxiMini Ltd sold equipment
liable at 4%, by charging Vat @ 12.5% in
tax invoice issued to purchaser. Here seller
has collected Vat @ 12.5% instead of 4%.
Whether purchaser will be entitle to claim
input tax credit of 12.5% or 4%?

59
Queries on Vat:

Q11. Mr.Pull enters into an agreement

?
with Mr. Push in Mumbai to lease the
equipment, which Mr.Pull is going to
manufacture at Surat after two months of
signing the agreement. The question here
arises is which State is entitle to collect Vat
and whether Mr. Pull is liable to pay Vat on
signing the agreement?
60
Queries on Vat:

Q12. M/s Strong & Co of Mumbai,

?
purchased locally building material like
cement, sand, steel etc, for construction of
factory at Vapi. Those purchases are
capitalized and transferred to Vapi. Whether
M/s Strong & Co will be entitle to claim
ITC on tax paid on such purchases and if
yes whether any reduction of ITC
applicable?
61
Queries on Vat:

?
Q13. Purchase of Software other then for resale
fall under negative list for availment of set-off
under MVAT Act. During the year a registered
dealer received a contract for constructing ATM
booth. Software purchased by him to be installed
in the ATM machines for function of ATM
machine. Whether he will be entitle to claim set-
off (ITC) for local tax paid on such software?

62
 Disclaimer

While due care has been taken to avoid any errors
or omissions in this presentation, we recommend the
government – published official text may be referred to
before taking any decision on the basis of this
presentation.

This presentation or any part thereof, either in

written form or in discussion form, is not meant to be
opinion or advice on any matter and is meant only to
facilitate discussion and debate from academic
viewpoint.

We recommend to obtain professional advice

before taking any decision based on this presentation.
63
 Thank You

?
Queries

Bhavin S Mehta
Tel: +91 22 26850485
E-Mail:bsmehta@vsnl.net
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 HOW TO WORK BETTER
DO ONE THING AT A TIME
KNOW THE PROBLEM
LEARN TO LISTEN
LEARN TO ASK QUESTIONS
DISTINGUISH SENSE FROM NON-SENSE
ACCEPT CHANGE AS INEVITABLE

ADMIT MISTAKES
SAY IT SIMPLE
BE CALM

 SMILE

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