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R K Rao
11-08-2012, 08:49 PM
I am posting herewith a hypothetical question -

A defence canteen purchases stock from the main defence canteen and the main defence canteen collects VAT for the stock purchased.

Thereafter, the stock purcahsed by the small canteen is SOLD to its employees at a premium (say upto 5% of the CP) and collects VAT also. The profit earned by the said small canteen is ultimately sent to its own office for the benefit of the same employees who purchase from the small canteen. In other words, the small canteen's profit by resale is also to benefit its own employees and is repaid in an indirect way (unit's celebration, gifts, sport prizes etc).

Therefore, there is a contention that the VAT on the profit made by the small canteen need not be paid to the Govt. but is to be treated as profit and merged with normal profit (i.e. VAT is not shown separately in the accounts).

I do not agree to this point. In my opinion, profit has been earned by resale and therefore, vat realised is due to the Govt.

However, I am confused that the canteen makes profit only for the welfare of its employees and therefore the profit made is to be ignored and therefore no vat should be paid.

Kindly clarify.

RK

ramanrao60
15-08-2012, 02:50 PM
I am posting herewith a hypothetical question -

A defence canteen purchases stock from the main defence canteen and the main defence canteen collects VAT for the stock purchased.

Thereafter, the stock purcahsed by the small canteen is SOLD to its employees at a premium (say upto 5% of the CP) and collects VAT also. The profit earned by the said small canteen is ultimately sent to its own office for the benefit of the same employees who purchase from the small canteen. In other words, the small canteen's profit by resale is also to benefit its own employees and is repaid in an indirect way (unit's celebration, gifts, sport prizes etc).

Therefore, there is a contention that the VAT on the profit made by the small canteen need not be paid to the Govt. but is to be treated as profit and merged with normal profit (i.e. VAT is not shown separately in the accounts).

I do not agree to this point. In my opinion, profit has been earned by resale and therefore, vat realised is due to the Govt.

However, I am confused that the canteen makes profit only for the welfare of its employees and therefore the profit made is to be ignored and therefore no vat should be paid.

Kindly clarify.

RK
As per cst act VAT is collected by a registered dealer and is to be remitted by the dealer to the government it is just like salary TDS etc