BUSINESS - Purchases and Sales various types with short definitions

MOST COMMON TYPES OF PURCHASES AND SALES

        In India, there 29 States and 6 Union Territories and 1 National Capital Territory (Delhi) as shown below:

Name of the States:

v    Andhra Pradesh

v    Arunachal Pradesh

v    Assam

v    Bihar

v    Chhattisgarh

v    Goa

v    Gujarat

v    Haryana

v    Himachal Pradesh

v    Jammu and Kashmir

v    Jharkhand

v    Karnataka

v    Kerala

v    Madhya Pradesh

v    Maharashtra

v    Manipur

v    Meghalaya

v    Mizoram

v    Nagaland

v    Odisha

v    Punjab

v    Rajasthan

v    Sikkim

v    Tamil Nadu

v    Telengana

v    Tripura

v    Uttar Pradesh

v    Uttarakhand

v    West Bengal

Name of the Union Territories

v    Andaman and Nicobar Islands

v    Chandigarh

v    Dadra and Nagar Haveli

v    Daman and Diu

v    Lakshadweep

v    Puducherry

Name of the National Capital Territory (NCT)

v    Delhi

        All the States and Union Territories and National Capital Territory are having their own Acts and Rules for the administration purpose and also for augmentation of revenue for administration and welfare schemes.  The Acts and Rules framed in all States and Union Territories will not be the same but differs.

        For the augmentation of revenue from the business sector, and industrial sector and service sector there are various Acts and Rules and in Tamil Nadu.

        Any trade or commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern; and any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern is called business comes under Business Sector.

Producing, making, extracting, altering, ornamenting, finishing, assembling or otherwise processing, treating or adapting any goods and process of goods which brings into existence a commercially different and distinct is called manufacture and such manufacturing industries comes under Industrial Sector.

At present Service Sector is governed by the Central Government and Services Tax levied on services provided.

       In Business or industry there are 2 main factors i.e. 1) Buying 2) Selling. Buying and selling were called as purchases and sales in other words.

       There are various types of purchases and various types of sales. The various types of purchases and various types sales most common in use were given below in detail.

Taxable Purchase: Taxable Purchase means purchase of goods other than exempted goods specified in the Fourth Schedule to TNVAT Act, 2006 or goods exempted by notification by the Tamil Nadu Government. Tax Invoice means an invoice issued by a registered dealer who sells taxable goods to another registered dealer in the State showing the tax charged separately	Taxable Sale: Taxable Sale means sale of goods other than exempted goods specified in the Fourth Schedule to TNVAT Act, 2006 orr goods exempted by notification by the Tamil Nadu Government. Tax Invoice means an invoice issued by a registered dealer who sells taxable goods to another registered dealer in the State showing the tax charged separately
Exempted purchase means the purchase of goods falling under the Fourth Schedule of the TNVAT Act 2006 and goods exempted by the Government, by notification, from time to time.	Exempted sale means the sale of goods falling under the Fourth Schedule of the TNVAT Act 2006 and goods exempted by the Government, by notification, from time to time.
Local Purchase: If the goods were purchased from the registered dealers or unregistered dealers or suppliers within the State is called Local Purchase, Intra-State Purchase and Purchases within the State	Local Sale: If the goods were sold to the registered dealers or unregistered dealers or customers within the State is called Local Sale, Intra-State Sale and Sales within the State
Inter-State Purchase: If the goods were purchased from the registered dealers or unregistered dealers or suppliers from the dealers outside the State such purchases are called Inter-State Purchase, CST Purchase, Purchases from outside the State.	Inter-State Sales: If the goods were sold to the registered dealers or unregistered dealers or Customer Buyers outside the Sale such sales are called Inter-State Sales, CST Sales, and Sales to outside the State dealers or buyers.
Imports: If the goods were purchased from out of the Territory of India such purchases were called Imports and there are three types. (a) direct imports (b) imports through agent (c) imports by transfer of documents. Direct Imports: When the user directly imports for his or their own use or consumption, such purchase is called direct imports and no question of any further sale will arise.  Some dealers may import goods and sold the same locally or inter-State and pay tax on their sales and such imports are also treated as direct imports.   Sale during import by Transfer of Documents: Many importers, acting as agents, import goods and the documents are transferred to ultimate buyer in India. Such buyer usually clears goods from Customs. This is ‘sale during import’ if the documents are transferred (i.e. endorsed in favour of buyer) before goods are cleared from customs. A sale or purchase of goods is deemed to be in course of import of the goods into the territory of India, only if (a) the sale or purchase either occasions such import or (b) is effected by a transfer of documents of title to goods before the goods have crossed the customs frontiers of India [section 5(2) of CST Act]. Purchase of packing material for export permissible: If card board boxes or gunny bags were purchased and used as containers for export of certain goods to a foreign country, it is deemed as ‘export sale’ as per section 5(3). The last purchase preceding the sale occasioning export should be for complying with an export order. In this case, the gunny bags purchased were for complying with export order and hence are eligible for exemption under section 5(3).	Exports: If the goods were sold to out of the Territory of India such sales were called Exports and there are three types. (a) Merchant Export (b) Manufacture Export (c) Service Provider Direct Exports or 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 A sale or purchase of goods is deemed to be in course of import of the goods into the territory of India, only if (a) the sale or purchase either occasions such import or (b) is effected by a transfer of documents of title to goods before the goods have crossed the customs frontiers of India [section 5(2) of CST Act]. Penultimate sale: 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. Purchase of packing material for export permissible: If card board boxes or gunny bags were purchased and used as containers for export of certain goods to a foreign country, it is deemed as ‘export sale’ as per section 5(3). The last purchase preceding the sale occasioning export should be for complying with an export order. In this case, the gunny bags purchased were for complying with export order and hence are eligible for exemption under section 5(3). Sale after Import is a distinct sale: An importer may import the goods, stock the same and sell to buyers. This is not a sale in course of import. Tax would be payable when the goods are sold in India as if the goods are being sold for the first time in India. Such sale may be Inter-State or Intra-State. Sale to Foreign Tourist: Sale to foreign tourist in India is not ‘sale in course of export’. Sale of Confiscated goods: Sale of imported goods confiscated by customs authorities cannot be called as ‘sale during course of import’ as sale did not occasion import and the sale was not by transfer of documents. SALE OF GOODS STORED IN CUSTOMS BONDED WAREHOUSE When goods are sold when they are stored in customs bonded warehouse, before clearance from warehouse continue to be in customs barrier when they are in customs bonded warehouse. Import would be completed only when goods cross customs barrier and not when they land in India or enter territorial waters.
Purchase Return: When goods are purchased input tax credit taken for taxable commodities. The seller may send the goods other than the goods for which order placed or the goods were not sold due to time expiry or damage or for any other reasons and hence the goods so purchased has to be returned to the seller who supplied the goods.  Such purchase return should accompany proper documents and the goods must be returned within 6 months from the date of invoice. Reversal of Input Tax credit is admissible only if the goods returned within 6 months.	Sales Return: When goods are sold output tax is paid for the goods sold. The buyer may return the goods mentioning certain reasons. Such sales   return should accompany proper documents like debit/credit note with date and the goods so returned must be received within 6 months from the date of invoice. If the goods were received within 6 months from the date of invoice, the output tax paid on the goods at the time of sale may be deducted as refund of Input Tax credit which is admissible only if the goods received within 6 months.
Purchases from Unregistered Dealer: Purchases of goods from the dealers whose TIN has been cancelled or applied for TIN by  a new dealer and TIN not received from the Commercial Taxes Department   are purchases from unregistered dealers. Purchases of goods from the persons or individuals or units who have not registered under the TNVAT Act 2006 and having no valid TIN are also purchases from unregistered dealers. If purchases of goods from the registered dealers without sufferance of tax no input tax credit available.	Sales To Unregistered Dealer: Sale of goods to any person or individual is a sale to unregistered person or individual which is commonly known as consumer sales, cash sales or retail sales. Sale of goods to any shops or units whose total turnover is below the threshold limit and not registered under the TNVAT Act 2006 and having no valid TIN are also a sale to unregistered dealer.
	Penultimate sale or Sale to Merchant Exporter.         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 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.
	Zero Rated Sale: Zero rate sales means a sale of any goods on which no tax is payable but credit for the input tax related to that sale is admissible.
	High Seas Sales / In bond sales If documents are transferred when goods are in customs bonded warehouse, it will be treated as transfer of documents before goods cross customs barrier. Sale before clearance from customs bonded warehouse will be ‘sale during import’ and will not be taxable.
Capital Goods Purchase: Capital goods are, in general, the movable assets like Plant and machinery used in industry, for manufacture of goods. Input Tax Credit is available for the purchases of Capital goods who manufacture taxable goods at 50% (ITC) in the first financial year of commencement of commercial production and remaining (ITC) within next 2 years and unavailed ITC will lapse to Government.(in Tamil Nadu)	Sale of Assets: Used machinery, used cars, used air-conditioners, used refrigerators, used two wheelers, condemned articles, discarded materials and damaged goods are treated as sale of assets and tax at the appropriate rate to be paid on such sales at the time of filing of monthly returns.