NCDEX says bourse deals are under state ST laws

The National Commodity and Derivatives Exchange has clarified that the transactions dealt on the exchange are local transactions and therefore covered under the local state sales tax laws.

They are not inter-state transactions and therefore not covered under the Central Sales tax Act, it said in a circular Wednesday.

Explaining the rationale, it said the selling party lodges the commodities into the accredited warehouse and the deliveries are effected by transfer to the buyer from the same warehouse, the transaction of sale including delivery is complete in the state where the delivery centre is located.

"Therefore, even in the case of sales to buyers outside the State, the commodities lying in the warehouse would not be dispatched to another State and there would be no movement (local or inter-state) pursuant to the sale. Such a transaction would fall outside the purview of Section 3 of the Central Sales Tax Act, 1956 which provides for taxation of transactions which involve inter-state movement of the goods," said the circular.

Moreover, the buyer may resell the commodities on the exchange and effect electronic delivery in which case also there would not be any movement of the commodities.

Similarly, he may take the physical delivery of the commodities and sell them in the local market, consume them or transfer them to his branch or agent outside the state, but the post-sale events would not effect the nature of the original sale transaction of the seller, the exchange pointed out.

The NCDEX circular further said that if the quantum of turnover of a dealer in the state where delivery centre is located, exceeds the minimum prescribed under the sales tax law of the relevant state, the dealer would become liable for registration as well as payment of sales tax in the state of delivery centre.

This will be in addition to sales tax registration that the dealer may have in any state other than the state of delivery centre.