PENULTIMATE SALE OR SALE TO MERCHANT EXPORTER
SALES AGAINST FORM H
SALES AGAINST FORM H
As per Section 5(3) of the Central Sales
Tax Act 1956, the last sales or purchases of goods preceding the sale or
purchase occasioning the export of those goods out of territory of India shall
also be deemed to be in the course of export, if such last sale or purchase
took place after and was for the purpose of complying with, the arrangement or
order for or in relation to such export.
There are three types of exports as
shown below:
1.
Merchant Export
2.
Manufacture Export
3.
Service Provider
Manufacture
Export:
Manufacturers
who export the goods themselves are
termed as Manufacturer Exporters and the goods exported by manufacturers were
eligible for exemption.
Merchant Export:
Exporting
of goods out of India may not be possible for small units directly by them and
such small units sell their goods to the big export houses and such sales are
defined as sales to Merchant Exporters. The Merchant Exporters purchases goods from
small units and exports the same to other countries and the exports made
through the Merchant Exporters are indirect exports through Merchant Exporters
and such exports need exemption from taxes to make the products competitive. Hence
exemption has been given to such sales as penultimate sales and the goods sold
through the Merchant Exporters were called Penultimate sale for Export. Penultimate sale is equal to direct export.
Exemption
to penultimate sale is subject to the following conditions that the penultimate
sales (i.e. last but one sale) is
i)
the sales must be for the purpose of complying with agreement or
order in relation to export, and
ii)
such sale is made after the
agreement or order in relation to export and
iii)
same goods which are sold in penultimate sale should be
exported.
In other words, the final
exporter should be in possession of export order from foreign buyer and should
take delivery of goods from the supplier making penultimate sale solely for
execution of such export order and export the same goods.
For this purpose there must be a pre-existing agreement or order
to sell the specified goods to a foreign buyer, last purchase must be after the
agreement with foreign buyer and the last purchase must be made for complying
with the pre-existing order. Only then the transaction is covered under section
5 (3) which will be treated as a ‘penultimate sale’
Hence,
such penultimate sale, i.e. sale preceding the sale occasioning export
is also deemed to be in the course of export under section 5 (3) of Central Sales
Tax Act, 1956 and is exempt from tax.
Only the
penultimate sale i.e. sale to the merchant exporter is exempt
but the purchase earlier to penultimate sale is not exempt and purchase tax if
any imposed by the State Government on such purchase will be payable.
The details
of penultimate sales were to be disclosed in the monthly returns with the
details of 1) Name of the Exporter to whom the goods were sold 2) TIN of
Exporter 3) Purchase order No of the Exporter 4) Purchase Order date of the
Exporter 5) Description of the commodity sold 6) Quantity details 7) Invoice
Number 8) Invoice Date and 9) Value of the goods sold to the Exporter.
Form H (with
details regarding export) has to be issued by the Merchant Exporter for the
above transaction to the dealer selling goods to the Merchant Exporter after
export of goods