Rohan is a trader selling raw materials to manufacturers for using the material to make finished products. He procures the material of his stock-in-trade from other States as well as from the local markets. Following tra

CS Professional · Advanced Tax Laws and Practice · PYQS · December 2016
Rohan is a trader selling raw materials to manufacturers for using the material to make finished products. He procures the material of his stock-in-trade from other States as well as from the local markets. Following transactions pertain to a sale made by Rohan to a manufacturer for the month of March, 2016: ₹ Cost of materials procured from other States excluding central sales tax 3,00,000 Cost of materials purchased from local market (VAT not included) 6,00,000 Other expenditure including storage, transport, interest, loading, unloading, etc. 94,000 The goods are sold at 10% profit on cost of production. Calculate the invoice value charged by Rohan to the manufacturer by taking VAT rate to be 12.5% and central sales tax rate to be 2%. Also work out the amount of VAT payable by him.

Answer & Explanation:

Computation of Invoice Value to a manufacturer under VAT Particular Amount (in ₹) Cost of Materials procured from other states excluding tax 3,00,000 Add: CST will be included in the Cost of inputs (3,00,000 * 2%) 6,000 Add: Cost of local Materials 6,00,000 Add: Other expenses 94,000 Total Cost of Production 10,00,000 Add: Profits 10% on cost of production 1,00,000 Sales Price 11,00,000 Output VAT @ 12.5% (₹11,00,000 @ 12.5%) 1,37,500 Less: Input VAT credit (₹6,00,000 * 12.5%) (75,000) Net VAT Payable 62,500 Note: Since ITC is not available on CST, it becomes the part of cost of production.

Topics: Indirect Tax

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