Sales Tax Instructions

Sales Tax Instructions, 2009
person who is involved in any of the said process. Therefore, vendors, by very nature of their job,
are manufacturers and liable for registration.
(b) The definition of ―supply‖ in section 2(33) of the Act states that ―supply‖ includes sale, lease
or other deposition of goods in the course or furtherance of business carried out for consideration.
Supply by such vendor is covered by words ―other disposition of goods‖ and hence is chargeable
to sales tax.
(c) The next question is about the value on which such vendor shall charge and pay the tax.
According to the definition laid down in section 2 (46) of the Act, ―value‖ is the consideration in
money against which the registered person supplies the goods. Therefore, a vender is required to
charge sales tax on the consideration/charges of conversion. If during this ―disposition of goods‖,
he has used tax-paid raw materials procured by the vendor himself, tax credit of the same shall be
available to the vendor.
(d) The aforesaid principle will inter alia apply even to cases where goods are chargeable to sales
tax on the basis of retail price. The principal will pay tax on the basis of retail price whereas the
vendor will be liable to pay tax only on his gross conversion charges.
(e) There is, however, one exception to the foregoing. Under section 2 (46) (f), in case of
processing of non-taxable raw materials, the value of processed goods will be open market price of
finished goods and not the processing charges alone.
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C.NO.3 (1) ST-L&P/2006 DATED 12 TH JANUARY, 2007
SUBJECT:
CLARIFICATION REGARDING CHARGEABILITY OF SALES
TAX ON DISPOSAL OF SCRAP BY PERSONS ENGAGED IN
THE MANUFACTURE AND SUPPLY OF EXEMPT GOODS.
I am directed to refer your letter ref. NR/739/2006 dated 15.12.2006 on the
subject noted above.
2. In this respect, it is pointed out that every registered person making
supplies of taxable good during the course or furtherance of taxable activity is required to
charge sales tax on such taxable supplies. M/s. Barret Hodgosen are carrying out a
taxable activity i.e. engaged in business of making supplies. It is immaterial whether the
supplies are exempt or taxable for the purpose of the definition of taxable activity as
given in sub-section (35) of section 2 of the Sales Tax Act, 1990.
3. Moreover, the scrap is not exempt and therefore the supply thereof is
taxable. The fact that they are not entitle them to any exemption against supply of scrap.
They can adjust input tax paid on packing material by apportionment as provided in
chapter IV of the Sales Tax Rule, 2006. However, they can avail exemption on such
supplies, under Sixth Schedule, if the total turnover from taxable supplies is less than five
million rupees.