This Tax Alert gives an update on the decision of the Andhra Pradesh & Telangana High Court with respect to “in-transit sale” in case of inter-state supply of goods under turnkey contracts.
The High Court (HC) held that supply of goods under the contract cannot be considered as subsequent sales in terms of Section 6(2) of the Central Sales tax, 1956 (CST Act). It was further observed that the title to the goods was not transferred during its movement from one state to another, but only after the goods were incorporated in the works in the State of Andhra Pradesh.
The HC, however, upheld the petitioners’ contentions that the transaction is an inter-state sale falling within the ambit of Section 3(a) of the CST Act, and would not be subject to tax under the Andhra Pradesh Value Added Tax Act, 2005.
The HC further held that the sale of imported goods under the supply contract is a sale in the course of import falling within the ambit of Section 5(2) of the CST Act.