Mixed Material Products, VAT + CST

[Deepak Whorra]

In the DVAT or CST Act/Rules/Procedures/precedents, etc is there any provision for defining what is mixed material in terms of value.

For example if a product that  is  taxable at 5% is sold for Rs.100/- and the main product description is of a value of, say, Rs.98 and the balance Rs.2 is the value of accessories to the product , will it be considerewd mixed material and so taxed . Or is there any threshold , value wise, of it being classified as the main product  ( 98% value ) and taxed at 5% for VAT purposes.

The Excise Act/Rules specify that the classification will be as per the main product

Numerous examples can be given - an automobile has an airconditioner ; a painting has a frame; A TV may have a DVD player in built; a computer may have an inbuild DVD player; etc  etc.... will these be considered mixed materials ?

 

Posts / Replies

[Rama Krishana]

What is the manner is which you are dealing with the issue. Are you selling the product for Rs. 100 or for Rs. 98. The concept of valuation in excise is not applicable to valuation issues in sales tax. You can not bifurcate the value in two parts where the goods are sold as a whole including the accessories. 

As long as classification issues, the same  would be related if you are selling two products independently. If you are selling the main product with accessories, the classification would be done on the basis of main product.

[Deepak Whorra]

Dear Mr.Rama Krishana,

 

Thank You for your reply.

 

Actually my question is still answere.

 

We manufacture and sell a product which is taxable at 5%  as per the DVAT schedule. This product is sold at, say Rs.100.

As an attachment to this product is an acessory.

The cost of the main product is Rs.98 and that of the Accessory it is Rs.2.

 

Now the departtment is claiming that the final product is a mixed material product and therefore taxable at 12.5% even if the cost of the main proct is 98%.

 

Is this a correct viewpoint ?

[Pradeep Khatri]

If your product falls under the residuary list then it will attract VAT @ 12.50% otherwise rate of tax will be 5%.

[Deepak Whorra]

Dear Mr.Khatri,

 

Thank You for your comments. However my question still remains unanswered.

 

We make Aluminium Utensils which are taxed at 5%. However, for utility and/or design purposes we put acylic handles or put a glass insert so that heating food is easier just by removing the glass insert and putting in the microwave.

Cost wise/ selling price wise, the Aluminium Utensil is 98% of the cost and the acylic handle is 2% or the Glass Insert is 4% of the value.

We sell the productrs as Aluminium Utensils.

 

The VAT department is contending that since the  product comprises of an Aluminium Bowl/Tray + Acylic Handle  or Glass Insert thus it is a mixed material product even if the value of the acylic part is 2% and thus the product falls in the residual category and should be taxed at 12.5%.

 

Is this correct ?

 

Kind Regards

 

Deepak