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State VAT & CST on E-Commerce Transactions

Value Added Tax - VAT and CST - By: - Rakesh Garg - Dated:- 18-3-2015 - A significant number of web sites, such as, Amazon.in, Flipkart.com, Snapdeal.com, eBay.in, etc., are engaged in E-Commerce (E-Com., in short) activities in India. The two major forms of E-Commerce are Business-to-Consumer (B2C) and Business-to-Business (B2B). While most of the companies cater mainly to consumers, the other companies might provide goods and services exclusively to other businesses. For an E-Com. company, sal .....

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rovided) it has collected. There is no question of sales tax or value added tax (VAT) in such a transaction. In the other form, which is more prominent, the E-Com. companies, with the help of data warehousing, data mining and analysis, develops software s to predict customer preferences and demand-supply mechanism. To save the time, logistic cost and earn a better profit, the E-Com. companies store goods on behalf of the suppliers which they feel are fast moving. With the increase in e-commerce .....

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who is liable to pay tax on sale of goods in the appropriate State. (b) As per Explanation 1 of section 2(b) of the CST Act, - Every person who acts as an agent, in any State, of a dealer residing outside that State and buys, sells, supplies, or distributes, goods in the State or acts on behalf of such dealer as- (i) a mercantile agent as defined in the Sale of Goods Act, 1930 (3 of 1930), or (ii) an agent for handling of goods or documents of the title relating to goods, or (iii) an agent for .....

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d be deemed to be dealer for the sales tax purposes. (c) Levy of VAT is a State matter. Situs of sale, generally, depends in a State from where movement of goods commences. If goods move in the pursuance to customer s order, and if the movement of goods terminates in some other State, it will be inter-State sale; and if the movement terminates in that State itself, it will be considered as local (intra-State) sale. (d) Tax shall be collected and paid only in the appropriate State. By paying the .....

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ance of sale agreement, or by the seller himself to its outside the State branch, then that movement shall be supported on the strength of Form F. (g) Procedure for levy of VAT on transfer of goods to the consignment/mercantile agent is materially different from that of on the clearing and forwarding (CandF) agent; whereas the former pays VAT/CST under his own TIN (registration), the latter pays tax under the TIN of the principal. In the case of CandF agent, since the sale is affected in the nam .....

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ds even before receiving of customer s order. Here, E-Com. company is liable to pay sales tax in the same manner as any other dealer. The sale shall be taxable at a consideration payable by the customer to the E-Com. company, who shall, however, be eligible to purchase goods on the strength of Form C and, as the case may be, to claim input tax credit under the State VAT Act. However, due to FDI restrictions in the retail sector, it is not possible for multi-national companies to adopt this model .....

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by the supplier, yet, invoice on the customer is raised by the E-com. company. Since transfer of the ownership by the supplier to the E-Com. company and then to the customer synchronizes, transaction would consist of two sales, viz, (i) From the supplier to the E-Com. company; and (ii) From the E-Com. company to the customer. In such cases, taxability shall be decided accordingly as per VAT/CST provisions. (C) Model- 3: The E-Com. company acts as a facilitator/booking agent between the sellers a .....

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Com. company. In this model, even though E-Com. company handles the proceeds, but, in true sense, will be considered merely as booking agent; and will not be liable to pay VAT. Here, goods remain in the custody of the supplier, who delivers the goods and raises invoice on the customer as his own goods. State VAT/CST shall be imposed on the amount of invoice raised by the supplier on the customers. Further, invoice shall be raised by the supplier in the State where goods are located, i.e., the se .....

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he supplier. Warehouse of the E-Com. company is shown as additional place of business of the supplier. In this model, though the invoice is raised in the name of the supplier yet the E-Com. company handles the goods as well as proceeds; thus, prima facie, E-Com. company will be considered as C and F Agent of the supplier. Accordingly, the supplier will be liable to obtain VAT-TIN in that State and pay VAT/CST as per the provisions of such State VAT Act. If the goods are transferred by the suppli .....

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This software is traded (download) through internet after making payment by credit card or otherwise. So far as the customer is concerned, generally, it is not difficult to decide the place of download. The position for determining the situs becomes difficult as far as the seller is concerned. Can we decide; which of the offices of ABC Company owns the ownership in this software, where this software is lying and from where the ownership therein is transferred? Unless these questions are answere .....

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of goods sold and services provided and the amount of tax charged thereon indicated separately. Likewise, section 50(5)(e) of the Delhi VAT Act provides that the retail invoice shall contain the description, quantity, volume and value of goods sold and services provided and the amount of tax charged thereon indicated separately. Similar provisions might exist in other State VAT Acts as well. (ii) Combo Offers (Goods + Goods) or (Goods + Service) In many cases, E-Com. Companies offer number of m .....

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