By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether charges for transportation and installation included in the “Sale Price” of goods is subjected to VAT?
Facts:
Appellant was engaged in the trading of household articles, electrical and electronic goods and sold these goods to its customers by placing orders with various manufacturers. The terms of sale were on ex-factory basis and the sale price was charged as per price list issued by the manufactures. Thereafter Appellant arranged for the transportation from the place of manufacturer to the customers by collecting transport charges. Further Appellant charged for the installation of these items at the place of the customers. The invoices raised by it had three components – sale price, transport charges and installation charges. Appellant deposited VAT on the sale price and paid service tax on the transport charges and installation charges. Authority demanded VAT on transport and installation charges for which the present writ is filed.
Held:
The High Court after referring to section 2(36) of KVAT Act held that, the said section specifies the term ‘turnover’ which means the aggregate amount for which goods are sold shall include any sum charged for anything done by the dealer in respect of goods sold at the time of or before the delivery thereof. If the transfer of title to goods is to be at the place of seller then the subsequent charges for transporting goods & installation do not form part of the amount for which goods are sold. From the price lists and sale invoices of the Appellant, it becomes clear that the sale prices are on ex-factory basis and do not include the installation. Therefore the sale price of the goods at the ex-showroom price attracts sales tax/VAT. Subsequent to the transfer of title in goods at the place of seller, Appellant acts as agent of customers for transportation of goods and installation. Therefore the transportation and installation charges do not become part of the sale price of goods. In this case, Appellant has collected transport & installation charges and deposited service tax thus Appellant has discharged its legal obligation of paying service tax. The State Government cannot be enriched by wrongly bringing the transport and installation charges as part of sale price of the goods. Thus the writ was allowed and the order was quashed.
