A manufacturer can purchase capital goods against Form C

May 01 2009, 22:34 IST
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Summary1We are a multinational company that recently started operations in India. The directors appointed in India are paid a certain commission, which is performance- linked. This amount is paid over and above their salary.

We are a multinational company that recently started operations in India. The directors appointed in India are paid a certain commission, which is performance- linked. This amount is paid over and above their salary. In this context, we have come to know that the payment of the commission may come under the purview of business auxiliary services and attract service tax. Please advise.

One of the primary conditions for the levy of service tax is the existence of a (service provider)-(service receiver) relationship. The relation of an employee and the employer is distinct from the relationship between a service receiver and a service provider. A clarification has also been issued by the Central Board of Excise & Customs in this regard. It has been clarified that the action taken by an employee for the benefit of the employer cannot be in nature of service. Thus, as long as the activities performed are the duties within the framework of the terms of employment, the amount paid by an employer to an employee, even when it is termed as commission, would not be treated as Ďcommissioní mentioned under the definition of business auxiliary service and, therefore, service tax would not be leviable on such amount.

We work for a pharmaceutical company. The raw material and packing material is supplied to us by our principals. However, the plant, machinery and the equipment required are being purchased by us. Please advise, whether, we are eligible to avail of the benefit of concessional rate of central sales tax (CST) by issuing Form C in the capacity of a manufacturer on the inter-state purchase of plant, machinery and equipment, considering the fact that we are not selling the finished goods.

A manufacturer is eligible to purchase capital goods against Form C, if the goods are covered in his registration certificate issued under the CST Act, 1956 and the goods are to be used for sale, that is the goods manufactured or processed by the registered dealer must be the goods intended for sale. It is immaterial whether they are for intended for sale by registered dealer/manufacturer himself or by anyone else. Hence, if you comply with the conditions mentioned above, you would be eligible to procure capital goods against Form C.

We are engaged in the gold plating of imitation jewellery supplied by jewellery manufacturers. In this context, we have been informed that the process of gold plating of jewellery

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