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From Buyer's point of view, In Interstate purchase to save
tax we issue "C" form but at the same time can u tell me by
allowing issuing "c" form govt bearing any losses in
collection of taxes. e.g.while giving c form i only pay 2%
instead of 12.5% the is it loss to govt of 10.5%, if yes
then why govt. allowing "c" form, pls explain.
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Good Question. Buyer issue "C" form to sellar while
purchasing from other states (Inter State Purchase) so that
tax rate will be less. In this case govt is not losing any
tax amount. Because the buyer who buys from other state
will sell those goods in his respective state, so govt will
get tax again from this buyer and this time rate of tax is
as per that state rules.
Lets take an example to understand this situation clearly.
X&Co a dealer from Andhra Pradesh who purchased goods from
Y&Co(Sellar) who is belongs to Maharasta. Mr. X&Co issued
a "C" form to Mr. Y&Co and paid inter state tax @ 2%.
Once X&Co received goods he sold goods to Z&Co(Z&Co belongs
to same state i.e Andhra Pradesh). And collected 12.5% tax
from Z&co and paid to govt.
If you abserve above example tax burden is transfering
from buyer to another buyer and Central govt got 2% tax on
1st situation and state govt got 12.5% tax on 2nd
situation. Please dont assume that govt got 2% & 12.5%
total 14.5% as tax amount. Govt will give input tax credit
fecility,i.e.roughly say you can set off your payment by
reducing the amount which you paid extra.
If you need more clarification on this you can reach me @
Karthik.dale@gmail.com
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