- Stock transfers to a branch or consignee have been the norms of trade in both pre and post VAT regime. Further, Stock Transfer can be both inter-state and intra-state.
- Various businesses contemplate options of selling the goods to another dealer or opening up a branch in another state, sending the goods on stock transfer and then selling from that branch
- We have evaluated various options being undertaken by corporates and the impact / implications of same under VAT regime in view of judicial pronouncements and legislative enactments have been provided below.
Scenario 1 – Stock transfer to another state
- Inter-state sales are covered by Central Sales Tax Act 1956
- Present rate of CST is 2% of the consideration on sale of goods
- In stock/branch transfer, goods move from one State to another, but there is no ‘sale’. Goods are sent to branch or depot or consignment agent in other State. Stock transfer/branch transfer is not subject to tax since there is no ‘sale’.
- Form F is required to be submitted to establish stock transfer.
- However, if buyer is identifiable before goods are dispatched, it is ‘Inter State’ sale and not a ‘stock transfer’. Thus, a branch supplying to only one dealer could be subject to detailed scrutiny by VAT authorities
- Another problem is that State VAT laws require reversal of input tax credit on purchases if such goods are stock transferred – thus there is no impact only when goods have been imported or purchased from another state (in which case there is no Input tax credit)
To View the Full article downloads the attached article
Parmod K. Bansal,Advocate
E-mail – email@example.com