VAT on closing stock transfered on change in constitution
Ram
(Querist) 05 November 2009
This query is : Resolved
Dear sirs,
We are a partnership firm in Karnataka. We are converting the same into a pvt ltd company. The existing partners shall be the directors. We are aware that we need to apply for new registration of company after canceling the registration of firm under KVAT Act. We are holding stock of Rs 1 crore (commodities taxable at 12.5%) in firm to be taken over by company.
Our query is are we suppose to pay VAT @ 12.5% on stock held by firm by billing the same with out put tax of Rs 12.5 lakhs to the new company and the new company claiming input tax of the same ( treating the same as purchases from firm).
We find it difficult to discharge such huge vat at one point and claim input for the new company. Is there any provision where stock can be transferred by means of agreement between firm and company. We will be in trouble if at the later stage if the authorities demand tax on closing stock transferred, if we transfer by means of agreement. Or is it better to raise tax invoice as said earlier.
pls advice
s.subramanian
(Expert) 31 October 2010
It is safe to raise invoices as said earlier.
R.Ramachandran
(Expert) 31 October 2010
Neither the old partnership firm is selling these goods to any one, nor the new private limited company is purchasing the same from any one.
The earlier books of accounts will remain with the newly constituted private limited company. Only its structure gets altered from a partnership firm to private limited company.
No invoicing - much less any VAT INVOICE WOULD BE REQUIRED in this case.
