F forms under CST Act 1956


To constitute interstate sales one of the basic requirement is that there should be sale. If a person sends goods outside from its state to its  branch office in another state then it is not sale because you cannot sell goods to oneself. Similarly if a dealer sends goods to its agent in another state who stocks and sells goods on behalf of the dealer, such agent is called consignment agent and such stock transfer is also not considered as interstate sales since there is no sales involved in it, sales will take place when such agent will sell goods. But to prove such stock/branch transfer, F form is required to be produced as proof.


F form required for stock transfer- F form is required to be produced as proof of stock transfer. As per section 6A(1) submission of F form is mandatory to prove stock transfer. Otherwise, the transaction will be treated as sale for all purposes of CST Act.

F Form is issued by the branch office/consignment agent receiving goods as branch/stock transfer to its head office/principal who is sending the goods by way of  stock/ branch transfer. The H.O./Principal produces such F forms to its assessing authority to prove such stock/branch transfer.

One F Form for one month: First Proviso to Rule 5 of CST Rules 1957 provides that one F form covering receipts during the month can be issued. If space in F form is not adequate, a separate list may be attached as annexure to form F giving details, provided that the annexure is firmly attached to the form. The blank form has to be obtained from sales tax authority in which the transferee is situated, i.e. State where goods were received. If the form is lost, indemnity bond has to be given and duplicate form clearly marked as Duplicate can be issued.  

When Stock transfer is treated as Inter state sales: When goods are dispatched to Branch office or consignment agent in other state and thereafter these goods are sold from the branch office or by the consignment agent then it is not a sales and is stock or branch transfer hence no CST liability arises.

However, if the movement of goods is occasioned on account of sales, the movement will be treated as interstate sales. It can be explained with an example

Suppose the dealer A registered in Punjab who manufactures some goods and send these goods after manufacturing to its branch office situated at Delhi wherefrom the goods are sold in Delhi. Now the movement of goods from Punjab to Delhi will be treated as stock transfer or branch transfer and for which no CST liability arises and F form will be issued by Delhi Branch to Punjab dealer.

But if a person B in Delhi wants to purchase some goods of special description which is not normaly manufactured by A and Mr B places order with  A in Punjab for manufacturing special descriptioned goods. Now If A manufactures such ordered goods and send them to its branch at Delhi then such movement will be an interstate sales and not a branch transfer since the movement of goods was due to a predetermined contract of sales.

Thus where goods were sold through branch, but buyer was known and identified before goods were dispatched from factory. Obviously this was held as inter state sales and not a stock transfer- Electric Construction and Equipment Co. Ltd. V State of Haryana- (1990) 77 STC 424 (P&H HC DB)

In South India Viscose Ltd. v. State of Tamilnadu-(1981) 48 STC 232 (SC)= AIR 1981 SC 1604 it was held that if there is a conceivable link between contract of sale and the movement of goods from one state to another in order to discharge the obligation under the contract of sale, the interposition of the agent of seller who may temporarily intercept the movement will not alter the interstate character of the sale.



F form is not a conclusive evidence but it is conclusive after assessing officer passes an order: Submitting F form is not a conclusive evidence per se to prove beyond doubt any stock or branch transfer. The assessing officer may make enquiry as to whether declaration furnished by dealer are true or not. The sales tax authorties can investigate if they are of the opinion that the movement of goods is an interstate sale and not stock transfer.

Section 6A(1) provides that the dealer may submit form F, along with evidence of dispatch of goods. If Dealer fails to furnish such declaration, the movement shall be deemed for all purposes of the Act to have been occasioned as a result of sale. Section  6A(2) provides that if assessing authority is satisfied after making enquiry that the declaration furnished by dealer are true, he shall make an order to that effect and thereupon, the movement of goods to which the declaration relates shall be deemed for the purpose of the CST Act to have been occasioned other than as a result of sale.

In Assam Company (India) Ltd. v. CT, Assam (1997) 107 STC 154 (Gau HC DB), it was held that F form is not conclusive. Sales Tax Officer can make enquiry whether the declaration is true and can reject the F form, if the transaction is found not to be genuine.

In D Dhandapani v. State of Tamilnadu-(1995) 96 STC 98(Mad HC DB), it was held that section 6A(2) of CST Act authorizes Assessing officer to make enquiry that particulars contained in the declaration furnished by the dealer are true and for this purpose other evidence produced by dealer is also to be considered. Authority can call for other information to verify the truth of particulars contained in form F. The dealer has to prove that details in form F are true. If he is unable to do so, transfer of goods can be taken as on account of inter state sales.

It has been held that by production of form F and providing proof of dispatch of goods, the initial burden of proof on the dealer is discharged- State of AP v. Dairy Development Corporation Ltd- (1994) 95 STC 478 (AP HC)

Once assessing officer had made enquiry and passed order that the particulars stated are correct, the presumption that the movement has occasioned otherwise that as a result of sale is conclusive. Reopening of assessment under State Sales Tax would not be permissible only on limited grounds of fraud, collusion, misrepresentation or suppression of material facts- Ashok Leyland Ltd v. State of Tamilnadu 2004AIR SCW 1001.

16 comments :

  • Dear Sir,

    Gud & Knowlageable Article,,,, but one thing need to be clear, is any monetery limit of issueing the F form..

    Pls clear

  • There is no monetory limit prescribed for F forms under CST rules.

  • Dear sir,
    Can you please explain the accounting treatment on following events:
    1. When goods are sent to Agent situated in other state.
    2.When actual sales has taken place by the agent on our behalf.

    and
    1.What is the tax liability in the hands of principal for the sales effected by consignment agent in other state?
    2.Under whose banner the sales will be documented? (who will raise the invoice)

    Thanks,
    CA. Jimil Shah

  • Hi Jimil,

    Although I am not an accounting expert, but according to me following enteries should be passed in the case you mentioned. I hope I am right.

    When goods are sent to an agent on consignment basis:
    Consignment a/c.......dr
    To Goods sent on consignment a/c

    When goods are sold by consignment agent:
    Goods sent on consignment account...dr
    To Sales Account

    When sale proceed is received from consignment agent:
    Bank/cash a/c.....dr
    Commission of consignee agent a/c...Dr
    To Consignment a/c

    Sale effected by the consigment agent will be the sale of the principal consignor.

    The consignee will raise invoice on the behalf of the consignor and will pay the VAT/CST in his own state where goods are sold.

  • Dear sir,
    I got the Accounting Entries..
    They seem to be perfectly right :)

    I have some confusion in the last two lines.
    It's clear that sale effected by the consignment agent is the sale of principal consignor...

    But is it so that he will issue the Invoices from the Invoice book of Consignor itself..?

    If YES, then he should collect CST only na..? As for consignee sitting in one state it will always be an Outside State Sale for him..??

    If NO, then it means that the consignee must have his own Sales Tax Registration No. there na?


    Please help me to clear my concept.. thanks..
    Jimil

  • The consignee will issue the invoice out of his own invoice book in his state. Consignee should have Sales tax or VAT registration in his own state and pay VAT/CST as per sales effected by him in his own state.

    Consignor will not charge any CST on goods sent on consignment but it will be a stock transfer against F forms, nor any tax will be payable by the consignor in his own state on sales as and when effected by consignee since the sales take place in the state of consignee.

  • Ok sir.. Thank you so much..

    It means the second entry that you suggested:
    i.e. When goods are sold by consignment agent:
    Goods sent on consignment account...dr
    To Sales Account........will be passed by the consignor on the basis of advice received by him from consignee.. that.. "Following Goods are sold"..

    And in case of VAT/CST returns filed by the consignor it will appear only once when goods are sold against Form - "F"... There will be no further mention of the same goods when they are actually sold..

    Am I right sir...?

    Jimil

  • Yes Jimil You are right.

  • Is Input VAT reverse condition applicable on stock transferred to interstate branch & what will be its percentage.

    Gursharan

  • Sir,

    I have a doubt regarding cancellation of CST registration
    The act says if the cancellation is initiated by the dealer with in 6 months before the end of the year. The registration will be effective from the end of the year

    My question is . whether the dealer is free to purchase interstate after submitting request for cancellation and before the cancellation becomes effective ie end of the year

    thank you very much for your reply in advance

    rajesh

  • @Gursharan: VAT input @ 4% has to be reversed under Punjab VAT Act 2005, in case goods are purchased from local dealer and are sent outside the state on account of stock transfer/branch transfer.

  • @Rajesh, Please provide the name of state about which you are talking about to get the perfect answer.

  • Dear Sir, I apply for VAT REFUND we can also apply surchage i.e. 10%. Pls.clarify

  • surcharge under PVAT Act has the same implications as of vat. Surcharge can be claimed as refund

  • Dear Sir, I would like to know that how transactions will be recorded in Consignee books . Will the Sales ( Consignment) done by him(Consignee) recorded. Will this be recorded as his Turnover as he is paying Vat on it and if not then his audit will be seen in terms of Commission Receipt?

    Honey Ganwani C.A. Final Student (Email honey_ganwani@yahoo.co.in)

  • Dear Sir,

    A dealer in Maharashtra appoints a consignment agent in Kolkata under a consignment agreement to sell the goods in West Bengal state. There is a condition in the agreement that the goods sent on consignment would not be taken back by the consignor. The consignee would issue Form F to the consignor and sell the goods in West Bengal state above the bottom price fixed at the time of transfer. Whenever the consignment agent sells the goods in West Bengal state, he would retain the excess amount above bottom price as his commission and remit the balance payment to the consignor. The consignor would issue an invoice to the consignment agent at the time the material is sold by the agent. The consignor would not have his office in West Bengal state. The agent would sell the material to the ultimate customers under his own TIN/VAT numbers and not under the numbers of the consignor.

    In this case, would the transfer by the consignor be treated as branch transfer? Is the procedure enumerated above is in order? Can the VAT authorities in Maharashtra disagree with the transfer and charge CST in Maharashtra for the said transfer?

    Thanking you in advance for a detailed explanation in the matter.

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