E1 Sales procedure

E-1, E-2 are the names of the forms issued for declaring that the goods are sold/purchased in transit.

E-1 sales.:
In this 3 states/ parties are involved during the transportation of goods. And as per the state tax laws, upon entering each state, a central tax of 4% for each is state is payable. However if the goods are redirected or endorsed to a different party then to avoid multiple taxation, this sale in transit is applied.

i. e.

Customer/Purchaser:  Mr. A at MP

Trader/Dealer:             Mr. B at Gujarat

Manufacturer:              Mr. C at Maharashtra

 A Customer/Purchaser Mr. A (MP) want to buy some products from Mr. B (GJ) which is product expert. But B hasn’t stock with him so he will contact his friend Mr. C (MAH) which is a manufacturer.

Now, Mr. B will ask Mr C to sell it to him, but deliver it to Mr A.

Invoice:

   Mr. C to Mr. B (Mr. B as buyer and Mr. A as consignee) with 4% CST for MP-MAH.

   The products will go directly to Mr A (MP).

   Mr. B (GJ) also raise invoice to Mr. A. (w/o Sales tax, with its profit, final payment)

So, CST is already applied to inv from Mr. C to Mr. A for actual good delivery, Mr. A do not required to pay additional sales tax for inv from Mr. B. This will save tax to Mr. A of MP from being taxed at GJ.

Forms involved:

   Mr. A will issue a C form to Mr B.

   Mr. B will issue a C form to Mr. C.

   Mr. C will issue an E-1 form to Mr. B

And if above sequence is broken at any point the party liable (Mr. A) shall have to pay 10% as CST.

In this case Form E-1 is for claiming exemption from CST on subsequent sale. So, that Mr. B can raise invoice w/o sales tax.

E1 Yahoo Answers