Pre sale expenses - VAT
Ram
(Querist) 01 June 2010
This query is : Resolved
dear Sir,
we are authorised dealers in Motor cars in karnataka. After the car is booked by the customer we have to incurr some expenses like RTO fees, registration expenses, petrol expenses for taking vehicle to RTO office and decoration of car etc. we are debiting the value to customers A/c and on final billing the sum is recovered from our customers. We are not paying Vat on these values. But the Assessing Auth claims these are pre sale expenses and as per the VAT rules these sums have to be included in the taxable turnover.
Pls reply as to whether these expenses are part of the sale value or not. looking fwd for your views.
regards
ram
A V Vishal
(Expert) 01 June 2010
The accounting treatment is faulty, such expenses should not be debited to the customer account nor a bill raised against it. Only the price of the vehicle should be billed. Since the accounting is faulty the A O is right in assessing it as a sale.
Ram
(Querist) 01 June 2010
dear sir
thanks for your reply. but that is the standard company software for billing and accounting
A V Vishal
(Expert) 01 June 2010
Software has to be customised not standarised in cases where the accounting treatment employed is different.
A V Vishal
(Expert) 01 June 2010
By billing the expenses it looks as if you have not provided value added services, it will appear as if the final bill is receivable is inclusive of the expenses described in your query for which your charging the customer.
Sumit Batra
(Expert) 01 June 2010
If you are making seperate entries for such expenses then they will be considered as expenses. However, in common paralance, the car dealers dont make seperate entries for such amounts but charge a cumulative amount towards handling & logistic charges and these charges are covered in that.
APARNA NANDAKUMAR
(Expert) 02 June 2010
Since you are debiting the value to your customers account and as this is done prior to raising of final bill and before delivery, the offficer is correct in treating the same as pre-sale expenses and it is vattable.
soumitra basu
(Expert) 04 June 2010
The bill should be made indicating that these types of expenses are re-imbursement of the expenses already incurred/ to be incurred by you on behalf of the customer. It should be separately charged and cannot be included with the value of the goods. These expenses has nothing to do with the Value of the Goods sold. If the expenses are separated then the same should not be added for the purpose of VAT. In my opinion you have good case to argue before the appellate authorities.
Ram
(Querist) 04 June 2010
But rule 2(36) of Karnataka VAT Act says turnover means the aggregate amount for which goods are sold or distributed or delivered or otherwise disposed of in any of the ways referred to in clause (29) by a dealer, either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration, and includes the aggregate amount for which goods are purchased from a person not registered under the Act and the value of goods transferred or despatched outside the State otherwise than by way of sale, and subject to such conditions and restrictions as may be prescribed the amount for which goods are sold shall include any sums charged for anything done by the dealer in respect of the goods sold at the time of or before the delivery thereof
if we go through the last 2 lines of the definition it says all the sums collected in respect of goods being sold. SO is there still a chance of saying it as a post sale expenses
