1. What is E1 AND E2 SALES AND PURCHASE?
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Best Answer - Chosen by Voters
E-1, E-2 are the names of the forms issued for declaring that the goods are
sold/purchased in transit.
A detailed explaination follows:
E-1 sales.
In this 3 states/ parties are involved during the transportation of goods.
And as per the state tax laws, upon entering each state, a central tax of 4%
for each is state is payable. However if the goods are redirected or
endorsed to a different party then to avoid multiple taxation, this sale in
transit is applied. (An example to explain this)
A trader Mr Gupta at Punjab want to buy some machinery, he contacted
that machinery expert Mr Mehmood of Delhi, now Mr Mehmood cant find
that machine in Delhi, but he has a freind Mr Satpaal of Kolkata who
manufactures that machine.
So in this case Mr Mehmood of Delhi will ask Mr Satpaal of Kolkata to sell it
to him, but deliver it to Mr Gupta at Punjab. And Mr Mehmood will receive
an invoice from Mr Satpaal (with his name as buyer and Mr Gupta's name
as consignee). The goods will go directly to Mr Gupta at Punjab, however
he will be billed by Mr Mehmood (with Mr Mehmoods profit of course). BUT
MR MEHMOOD WILL NOT ADD ANY SALES TAX ON HIS BILL TO MR
GUPTA. and this is the interesting part, that since goods have been taxed
at 4% at source from Mr Satpaal of Kolkata they will not be further charged
any tax. This will save tax to Mr Gupta of Punjab from being taxed at Delhi
• Now comes the forms part. In this example Mr Gupta of Punjab will issue a
C Form to Mr Mehmood of Delhi, and Mr Mehmood to Mr Satpaal, AND MR
SATPAAL WILL ISSUE AN E-1 FORM TO MR Mehmood of Delhi, thus
completing the chain. And if this chain is broken at any point the party
liable shall have to pay 10% as central sales tax.
Now same is the case with E-2 form, however there are more than 3
States / parties involved in this transaction. And the second stage seller
(Mr Mehmood in above example) has to issue an E-2 form to the
subsequent purchaser (Mr Gupta in above example)
I Hope that this has cleared yuor query however it is advisable to make a
graphical representation to understand and remember it clearly.
Best regards.