Dayal R Kundani
Transit Sales under the CST Act .
Transit sales
These are generally known in the market as ‘LR sales’, ‘subsequent inter-State sales’ and ‘E-I sales’. These transactions fall under clause (b) of section 3 of the Central Act, which reads as follows:
“3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce :-
A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase –
(a) occasions the movement of goods from one State to another; or
(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.
Explanation 1: Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.
Explanation 2: Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State.”
In these transactions the dividing line between sales or purchases under Section 3(a) and those falling under Section 3(b) is that in the former case the movement is under the contract whereas in the latter case the contract comes into existence only after the commencement and before termination of the inter-State movement of the goods. A transaction can be either falling under clause (a) or under clause (b) but not under both the clauses at the same time. The assessing authority has to keep in mind the Explanation-I under section 3 while deciding the nature of these transactions. A sale is said to be falling under clause (b), if there is transfer of document of title to the goods during the course of movement from one State to another State. Documents of title include sale invoice, way bill, delivery challan, lorry receipt, railway receipt; etc. At the time of such transfer, the goods may be in the originating state or in the destination state. If the goods are taken delivery from the common carrier for example, lorry office or railways by the purchaser, then there is said to be break in inter-State movement of goods and there can be no transit sale thereafter. The person making a transit sale is also called subsequent inter State seller.
Exemption of transit sales from payment of tax
Section 6(2) of the Act provides for exemption from payment of tax on the subsequent inter-State sales of goods, if such dealer claiming exemption files before his assessing authority a Certificate in Form E-I or E-II as the case may be obtained from his seller and a declaration in Form C obtained from his purchasing dealer.
Sale under Sec 6(2) E-I Transaction
Under E-I transaction the movement of goods from one state to another is effected by a transfer of documents of title to the goods during their movement from one state to another (sales in transit)
CASE
Manufacturer — ABC Pune
ABC Customer-M/s I Trade , Aasam
Ultimate Buyer M/s. XYZ Kolkata
ABC Pune will raise Invoice on M/s I Trade charging CST @2%
The LR will reflect destination of Kolkata (Actual place of Delivery)
M/s I Trade will endorse the LR enroute to Ultimate Buyer –as being actual Place of Delivery, without taking the delivery of goods and will raise commercial Invoice on his Customer at Kolkata giving reference of LR endorsed.
M/s I Trade will need to Issue C form to ABC, Pune
ABC- Pune will issue Form E-I to M/s I Trade giving reference of Form C received.
M/s I Trade buyer being XYZ will issue C form to M/s I Trade.
Documents
- M/s ITrade will need to endorse the Original LR in favour of his ultimate customer –Actual Place of Delivery before delivery of the goods to customer
- M/s I Trade will need to raise Commercial Invoice with reference of endorsed LR Number and Date appearing on the face of the Invoice on his ultimate customer
- On receipt of Commercial Invoice and the Endorsed LR ultimate customer can take delivery of the goods and make the payment to M/s Industrial Trade & Agencies.
- Rest for issuance of Statutory forms, the same already stated herein above.
The following text to be endorsed on the LR by M/s Industrial Trade & Agencies
|
Please deliver stocks To (XYZ Customer) (Name with complete address of the location) For (M/s I Trade)
Authorised Signatory
|
Other Aspects of 6(2)/ E-I sales
There can be different situations under 6(2) sales apart from the above
- First point customer and seller are in the same state
Many times orders are placed by local customers (within the same state) by directing the same to be dispatched to outside state customer.
In such transaction even though local customer is shown as consigner and “ship to” destination is outside the state, the transaction will qualify for sale in transit under sec 6(2) being sale in transit.
The local customer has to follow the procedure of Endorsement of LR in the name of ultimate buyer.
The Following judgment of M/s. Fatechand Chaturbhujdas vs. State of Maharashtra (S.A.894 of 1990 dated.12-8-1991) decided by Maharashtra Sales Tax Tribunal clarifies the aspect:
———-In this case the local party purchased goods from other local party and directed the same to be dispatched to outside State party. Even though local party was shown as consignor, taking the view that while placing order there is term for outside place dispatches, Maharashtra Sales Tax Tribunal held that the sale between two local parties is first interstate sale and the sale by local party to outside party is subsequent interstate sale, duly exempt u/s. 6(2)—————-
Clarification on Predetermined Sale
Even if there is a predetermined sale, there is no adverse effect on the sale to be claimed u/s. 6(2).
The Point to be considered here is that if the start and end of movement of goods is interstate then CST will be apply but if start and end both in same state then vat will be applicable.
As a precautionary measure the copy of endorsed GR/LR should be obtained from the customer who has executed interstate sale as this will affirm that no set off has been claimed and goods have moved interstate.
The legal position with respect to above interstate sale is clear, amongst others, from the following judgments:
M/s. Duvent Fans P. Ltd. vs. State of Tamil Nadu (113 STC 431)(Mad.):- Local dealer purchased goods from other local dealer and directed to send them to his purchaser’s place in other State. Madras High Court held that the first transaction is first interstate sale and the second sale is also subsequent interstate sale exempt u/s.6(2) of CST Act. The above judgment is directly on issue and hence will govern the field.
In pursuance of the judgment of Hon’ble SC in the matter of A&G Projects & Technologies Ltd. Vs. State of Karnataka [(2008) VIL 40 SC] and subsequent interpretation by the Department that pre determined sales are not eligible, the following states have issued circulars clarifying the subject of eligibility of sale in transit on such pre determined sales
- The Commissioner of Commercial Taxes, Andhra Pradesh, Hyderabad in his circular in Ref. No. AIII(2)/91/2010 dated 7-5-2010
- Government of West Bengal Directorate of Commercial Taxes in their Trade Circular NO. 11/2010 dated 4-10-2010
Therefore, even if the sale is predetermined it will still qualify for sale in transit under sec 6(2)
Caution
For all purposes receipt of Form C from such local customer in the same state has to be ensured. Also as a matter of safeguard undertaking towards payment of differential vat and interest in absence of provision of the form C within 3-4 months to be obtained before execution of transaction.
If however the above mode is not to be preferred then the local customer should be charged full VAT on sales at the existing rates, for which set off can be claimed by the distributor and subsequently interstate billing by the customer can be made against form C to his customer.
Restrictions under 6(2) E-I sales
E-I transaction are not allowed in cases of dispatch thru courier or by air
Moreover a Courier Docket is non-negotiable instrument. In some cases it is also known as AWB (Air Way Bill) or DWB (Docket Way Bill).
The main ingredients of “sale in transit” transaction is, the Endorsement given on the Lorry Receipt. The CST Act considers Lorry Receipt copy as the document of transfers. The Act is not amended to incorporate various new mode of transport like courier or Air Way Bill, etc.
“Endorsement” means the signing by the consignee or the endorsee after adding a direction on a negotiable transport document
Further relevant section of CST Act is read as under
Section 6 in The Central Sales Tax Act
6(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods to a registered dealer, if the goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act:
The document of title has been defined as under
Section 2(4) in The Sale Of Goods Act, 1930
(4) ” document of title to goods” includes a bill of lading, dock warrant, warehouse keeper’ s certificate, wharfingers’ certificate, railway receipt, Goods Carriage transport document (for transport of goods by road, rail, inland waterways or sea), warrant for the delivery of goods ……….. the possessor of the document to transfer or receive goods thereby represented;
In view of the above clarification such transactions by way of courier will not be recognized by the department as 6(2) sale and will not qualify as “sale in transit” and will attract tax liability.
Invoicing Methodology
- First point customer and seller are in the same state
Let us assume Manufacturer “A” is located in Maharashtra
Distributor “B” is located in Maharashtra who is customer of “A”
End customer “C” (Dealer is located outside Maharashtra) who is customer of “B”
Ø Should be dated before the date of Distributor “B” Invoice
Ø Should be duly endorsed by Distributor in favour of Customer “C”
Ø Consignee address shall be mentioned as “B” c/o Customer<address>”.
- First point customer is outside the state of Maharashtra
Let us assume Manufacturer “A” is located in Maharashtra
Distributor “B” is located outside Maharashtra who is customer of “A”
End customer “C” (Dealer is located in the same state of the customer or any other state) who is customer of “B”
( Author can be reached at dayalkundani@gmail.com)
A- Manufacturer
B – First stage dealer
C- Second Stage Dealer
D- Final User
A-B-C-D this is the process of goods
Than tell me Tax rate applicable to B for purchase of material against LR Sale.
We are a company registered in chennai. We buy goods from a company distributor in chennai paying 14.5% VAT.
I need to sell my goods to a Client in Tirupathi.
Can I sell through CST 2%.
Can I adjust my VAT credit against the sales made.
What will be my tax burden.
Whether this sales is profitable or not if considered as cost to cost sales
can we use two no. of road permit in E1 Sale?
movement of Goods in Three States
I HAVE ONE DOUBT ON WHICH INVOICE VALUE ULTIMATE BUYER SHOULD MAKE WAY BILL?
Buyer – A, Zarkhand.
Consignee – B Orissa.
Supplier – C Maharashtra
C will deliver material directly to B,
and raise Bill on A., as A is not selling Material To B,
A Will give material on Lease Basis to B only.
in that case who will issue Form-C and how.
Sir
We are Regd at Kolkata name M/s IEP , buying goods from a company M/s Meditron regs at Jharkhand , I want the goods to be delivered directly to the stores of my customer named M/s Hec registered at Ranchi . Kindly suggest what is the rate of sales tax Meditron will be charging and at the same time how can I pass on the EXCISE DUTY GATE PASS TO HEC NAME
Sir
We are Regd at Kolkata name M/s IEP , buying goods from a company M/s Meditron regs at Jharkhand , I want the goods to be delivered directly to the stores of my customer named M/s Hec registered at Ranchi . Kindly suggest what is the rate of sales tax Meditron will be charging and at the same time how can I pass on the EXCISE DUTY GATE PASS TO HEC NAME
Dear Sir,
My firm located in Ghaziabad Uttar Pradesh and i have a client from Hyderabad.
Now I want to send material at Allahabad Uttar Pradesh and send Bill to Hyderabad on CST
Can it possible that we are send the bill to Hyderabad and material send to Allahabad U.P.???
Please help……
Hello,,,
We are traders not applicable to excise duty. We are purchasing a goods from excise duty manufacturer and selling excise duty purchaser. can we use E1 transaction pls explain.
hello sir, we are importing goods from china and departed in chennai. now we need self waybill to bring goods from chennai to andhrapradesh or not
HELLO SIR..,I AM FROM HYDERABAD(TELANGANA)..I AM BUYING GOODS(ORGANIC PRODUCTS) FROM BANGALORE,KARNATAKA..ETC.AND SELLING TO OTHER STATES LIKE TELANGANA & ANDHRA PRADESH HOW TO DO CST,VAT,EXCISE DUTY..AND WHAT ARE RULES TO BE FOLLOWED..CAN ANY ONE PLEASE GIVE ME REPLY…
inter state goods delivery procedure required [ e sugam form ]
goods delivery form tamilnadu to kanataka e-sugam from procedure
for example ” karnataka to tamilnadu.
We (B) are located in Maharashtra and purchase goods from (A) Karnataka, which is shipped directly to our customer (C) in Gujarat or (D) in Maharashtra, Consignment is booked by (A) through transporters viz. XPS/Gati, docket shows delivery address of our customer C or D , A charges CST in their Invoice , invoice of A shows consignee as C or D , buyer as B, does this transaction qualify for Sales in Transit without charging any tax by B to C or D. C form issued by C or D to B and B to A, A issues E I to B. Is this acceptable Sales in Transit ?
I have a question
Can we sold goods on consignment in other state, which are purchased from interstate against C Form. Please reply, what will be tax liability in that case
1. i am a manufacturer at west bengal and i have purchased a heavy duty vehicle from volvo india , bangalore at cst 2% through a dealer from kolkata at a price of rs 30 lakh. the dealer from kolkata have issued me the invoice without charging 2% cst and waybill part 2 has been issued to me by volvo india, bangalore for an amount of rs 2610333.
so my doubt is that on whose name i should provide c form and at what value. and i also have a doubt that whether the dealer from kolkata would provide me with e1 form or not.
Dear Sir,
It is very informative to correctly execute the transaction and in issuing Form’C’ and E1.
But I have a doubt in this regard that who has to issue the way bill whether ultimate buyer or who has acctually placed order to manufacturer?
Please help us inthis regard.
Thanks for giving such extraodinary informaton.
We have purchased goods from SAIL Bhilai (Chhatisgarh State). The invoice of SAIL shows our firm located in Raipur (Chhatisgarh State) as buyer and the consignee has been shown as my customer outside the state of Chhatisgarh in the SAIL invoice itself.
The Steel Authority Of India has charged us local VAT at 5 % and we have billed to our customer at 2 % CST. The goods have moved directly from SAIL Bhilai to my customer outside the State.
We have claimed set off of VAT against CST and thus claimed refund of the excess amount. Please help me to understand the situation whether I am rightly eligible for the excess VAT paid to SAIL.
Dear Sir,
We have purchase one E1 sales.
ABC from UP billed on XYZ-Kolkatta and delivery at our place in AP. The billing and delivery details are all mentioned in the Bill and Transport LR. So it is a predetermined sales. We have issued waybill to ABC-UP. We have issued C form to XYZ-Kolkatta.
Is this transaction Valid.
Dear Sir,
I have one question
I am in Haryana.
I got PO from Gujrat.
Supply would be done from Gujrat.
What should I charge to my customer In Gujrat.
Regards,
Deepak
Respected sir,
Please clarify my doubt.
We are in Vijayawada, Andhra Pradesh has taken Order from Maharashtra State under E1 Transaction and we have placed the same to our principals at Maharashtra State under E1 Transaction only. Our principals have supplied the material to our Customer and raised Invoice to us under VAT. Our Principals are saying that they have raised vat invoice because they are supplying the goods in their state only. But they have raised Invoice to us in Vijayawada Address only and used our CST Waybill for this Transaction.
Due to Oversight we have raised our Invoice to the Customer under E1 Transaction. This transaction was held on March 2015.
Our Principal said to me that if you are able to give us the clarification with sections in Central Sales Tax we will revise the Invoice into E1 Invoice otherwise it will remain as VAT Invoice only. If it is VAT Invoice we have to pay penalty to the Sales Tax Department for non submitting of E1 Form and we have already paid the Invoice amount including VAT.
Now we request you to kindly give us your advice if there is any chance to change the Invoice into E1 Invoice.
Kindly give your advice through return mail for enable us to take further action.
Thanking you sir and awaiting for your reply sir.
hi plz guide.
A)I need to raise the bill to (b) xyz in (m.p) but material will be dispatch from (c) abc chattisgadh.
How will it be the billing cycle form involved .
we have to send a machine to a hospital in Karnataka. The hospital does not have TIN number. Can the hospital generate Esugam Form. The hospital is ready to give an undertaking saying the machine is for self use and not for resale. The hospital pays full excise as well as full VAT.
WHAT IS THE BEST SOLUTION TO DISPATCH THE MACHINE UNDER SUCH CIRCUMSTANCES.
PLEASE ADVISE.
1) ABC seller in maharashtra, 2) XYZ buyer in maharashtra and 3) DEF consignee in gujarat than which Form will be applicable in this transaction like C Form, E1 Form, EII form? Who responsible for issuing Form C & Form E1.
1) ABC seller in maharashtra, 2) XYZ buyer in maharashtra and 3) DEF consignee in gujarat than which Form will be applicable in this transaction like C Form, E1 Form, EII form? Who responsible for issuing Form C & Form E1.
PLease confirm on the below transaction.
We are the Seller in Punjab
Sold To Party in in Delhi
Ship To Party is in Jharkhand
We have mentioned the Sold To Party Tin No. & Address details on Local Punjab Barrier Form but In Destination fild we have mentioned the actual place of delivery i.e. Jharkhand…..Is thi scorrect or TIN NO & other detailsof Ship to party has to come in that loical barrier form.
we have also got the Road Permit form from the Ship To Party with all his details TIN nO. Address & other req. details for crossing Kharklhand Barrier.
But Plz confirm for the local punjab barrier case that whether we have mentoined the coorct details. & also on GR we have mentioned the SHIP to Party Address
Can you clarify this.
Rohit Lamba
lambarohit@gmail.com
A (in NAGPUR) has to dispatch goods to C (in HYDERABAD) but Invoice Done on B B(in BANGALORE, KARNATAKA).
C(in HYDERABAD) wants to RETURN some of the goods to B B(in BANGALORE, KARNATAKA).
B(in BANGALORE, KARNATAKA) wants to sell the goods to D(in HUBLI, KARNATAKA) which will be sent by C(in HYDERABAD).
Please suggest what procedure to adopt in the above case. ASAP
Company A having Regd off in Mumbai with Maharashtra TIN no.Importing material from China at Vishakapatnam port.
Sending the stock to Chattisgarh state. (additional place of Bussiness of company A, having Chattisgarh state TIN number. The queries are :
1. Can company A sell the complete consignment directly to one or more party, if yes, How?
2. What are the tax liabilities to be followed ?
3. What are the formalities to be followed by Chattisgarh office as ADDITIONAL PLACE OF BUSINESS ?
Sir,
In the E-1 Sale transaction who will issue Road Permit/way bill, can end customer issue Road Permit to Supplier directly.
In Madhya Pradesh, there is online Road Permit (Form 49) option with fill-up complete details of Invoice & vehicle from Original movement point ie. Principal supplier.
Pls mail me the answer because we are still confuse in this point.
Regards
Anil Nair
+919630086586
Sir,
Suppose if X situated in Mumbai place order to y sitautaed in Delhi & ask to deliver the material to their buyer situated in delhi only then which tax rate will be applicable.and y will raise the invioce in whose favour.
Sir, Based at Salem – Tamilnadu, I am purchasing equipment from Bangalore for which I am paying Excise Duty & VAT 2% against C form and I am billing that equipment with my profit and TN VAT 14.5 % to Granite manufacturing industry (100% EOU)in Tamilnadu.
I am planning to make it as E1 Sale (Sale in transit process) since I am not taking delivery of the goods.
In this case
What are all the taxes will be charged me by my supplier when I am purchasing?
How I can add my profit?
How can I bill it to my buyer?
Should I add any tax in addition to my profit?
Should I mark my invoice as E1 Sale?
And
In E1 sale, is there any provisions to get Excise Duty exemption for buyer since the buyer is 100% EOU manufacturer. Buyer has been claiming ED exemptions for other kind of machinery purchase. My supplier and buyer are registered with Excise. But I am not a registered one.
I made a E1 sale. I sold the goods of Rs. 100/-. The sale price of the goods is Rs. 80/- (dealer price). ie My billing should be 80/-. Now my dealer tells me to give him a credit note of Rs. 20/- . Is it correct ?
we are in jharkhand and purchasing the products from gujrat. company billed my invoice with door delivery and i have to pay the transportation fair.
now, the question is if i paid Rs 7/kg to transporter then the price of product is X+7 and vat is (X+7)+14%. and am paying the vat of transportation which is also increasing my income limit but in actual i am paying it to sale tax depart.
eg if the weight of product is 20 kg and product price is rs100 (after cst)
100+140(fair)
=240
profit of rs 5 per bucket
vat 245*14%= 34.3
245+34.3 = 279.30
now why am paying vat for transportion.
thanx sir
Dear Sir,
please refer any judgement on –
if Form E-1 not received and Form C Received.
This sale treated as Central Sale Against Form C or not?
Manufacturer A in kerala
Dealer B in Mumbai
Buyer C in Mumbai
What are the appicabble taxex to be added in pricing from B to C
Price+ Cst 2%+ commission +Transport
any other taxes like octroi or entry charges
pls
Sir,
Kindly tell me in that in Our Case, we Sold goods@5% CST to Our customers who is situtated outside the state and Buyers & consignee are same and is a Govt.Organisation. Now they are asking foe E1 form but will not issue C Form as we have already charged CST@5%. Is it Valid?
A from Ahmedabad buys goods from B in Mumbai and delivers the same to C in Nagpur. Please help to understand VAT/ CST applicable and C & E forms involved?
Thanks
Trader A is located in Ahmedabad. A buys good from B in Mumbai and delivers the same good to C in Nagpur. Can you help VAT / CST applicable in this case?
Thanks
dear sir my manufacturing unit and i have purchases goods from within the state against E-1 transaction can i Issue a C Form to Local Party. tell me sir
We (B) are located in Maharashtra and purchase goods from (A) Bangalore, Karnataka, which is shipped directly to our customer (C) in Gujarat or (D) in Maharashtra, Consignment is booked by (A) through transporters viz. XPS/Gati, docket shows delivery address of our customer C or D , A charges CST in their Invoice , invoice of A shows consignee as C or D , buyer as B, does this transaction qualify for Sales in Transit without charging any tax by B to C or D.
C form issued by C or D to B and B to A, A issues E I to B. Is this acceptable Sales in Transit ?
We have a unique case. We are located in Tamilnadu and want to sell the goods to a dealer, who is also located in Tamil nadu. But the delivery of the mateiral has to be made to a company located outside Tamil nadu. The delivery will be made to the other state with the endorsment by our buyer in the LR.
The question is whether the buyer who is located within Tamil nadu can issue “C FORM” to us (whol also located within Tamil Nadu)? Is there any recent judgement agianst this practise.
Thaking you
Best Regards / B. Ramesh Kumar
To whom way bill to be issued:
A manufactuerer located in orissia
B buys from A located in Kolkata
C buys from B located in kolkata
C places order on B and B places order on A . B will not take delivery of the goods from A , B will only ensure that goods will be delivered at C (E-1 Sale).
Question:
Way bill will be issued by C on whom B or A
C form will be issued by C on whom B or A
really very helpful
Now I have a doubt,
Seller is in Jharkhand – Party X
Buyer is in Jharkhand – Party Y
Buyer is a trader and wants to sell the material outside Jharkhand to Party Z
Should he follw teh route of E 1 transaction and get the invoice made with Party Z as consignee . The CST sales shall be made on 2 % basis.
Can you clarify this
MD MANSOOR
Now I have a doubt,
Seller is in Jharkhand – Party X
Buyer is in Jharkhand – Party Y
Buyer is a trader and wants to sell the material outside Jharkhand to Party Z
Should he follw teh route of E 1 transaction and get the invoice made with Party Z as consignee . The CST sales shall be made on 2 % basis.
Can you clarify this.
Ujjwal Sinha
Sinhaujjwal@gmail.com
Well written .Informative.Wish you could write all about VAT and Excise this way.