Date: 12-12-2016.

Sub: Treatment of conversion charges received from TSL – GST is applicable exempted transactions - Reg.

1. Exempt Transactions – Conversion charges also treated as exempted transaction, hence there is no transfer of property involved in the Final product.

2. Exempt Transactions – Depot Transfers and Consignment Sales.

We are going to start production under conversion agreement with TSL, upcoming GST, the transactions under conversion charged received from TSL to the extent of prime material (Chrome Ore and Coke & Coals) supplied by TSL and produced final product, added to fluxes like Quartz, Bauxite, Dolomite, Lime Stone and Carbon paste.

Under Section 13(7) of the APVAT Act on the goods purchased and used in works contract and also liable to pay tax under Section 4(7)(a) of the APVAT Act if there is any transfer of property to the contractee while executing Works Contract.

We have followed filing of returns and Assessments of the transactions fallen under conversion charges received as exempt transactions under APVAT Act. The procedure followed by us for availing ITC (Input Tax credit) furnished here under:

As per AP VAT Act A x B / C i.e.

A – tax paid (on purchases)
B – Taxable Turnover
C – Gross Turnover

If, B consists the total Turnover of aggregate sales of VAT, CST, Exports and Deemed Exports.

If, C consists the total Turnover of aggregate sales including Depot transfers / Consignment Agent Sales / Conversion Charges.

While preparing the calculation of Input Tax Credit, excluding the turnover of Depot Transfers, Consignment Sales and Conversion charges which are exempt transactions Section 6(1) under APVAT Act. There is no transfer of property involved in the final product of conversion in to HCFC, hence the total conversion charges treated as exempt transactions by virtue of Rules not for Act.

EXPORTS:

We are clearing the goods with out payment of duty for Exports under Rule 18 of Central Excise Act, 1944 preparing the Central Excise Invoices under Rule 11 of 2000 Rules.

1. Preparing the Central Excise invoices
2. At the time of adoption of rate for USD$ (all contracts are depends on cents converted into $) preparing the ARE1 for removal of goods for Export as per the notifications issued by CBEC time to time for trade and commerce.
3. After completion of customs formalities get the Shipping Bill / Bill of lading / Indian Origin Certificate and other documents. We have to lodge the bill in USD $.
4. All Export contracts are covered by Letter of Credit.
5. Basing on the Letter of Credit bank will release the payment in to converted Indian rupees. The conversion rate is different from the Shipping bill.
6. On receipt of the proceeds party will be paid the amount in USD $.
7. When the proceeds remitted to our bank, the banker will credited to our account INR converted USD$.
8. How can we sort out the adjustment in Monthly returns in GST regime, the difference between shipping Bill / Bank realization?
9. Whether, we can adjust the difference after 3 months.
10. Where the assessment conducted by Central / State Government authorities by month to month is not tallied with our Books of Accounts. It is difficult to convince to the authorities, it makes more and more penalties and interests will be liable.