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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 E2 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. (IF YOU FIND THE ANSWER HELPFUL, PLEASE VOTE THIS ANSWER)

5 years ago

Modvat stands for "Modified Value Added Tax". It is a scheme for allowing relief to final manufacturers on the excise duty borne by their suppliers in respect of goods manufactured by them. eg ABC Ltd is a manufacturer and it purchases certain components from PQR Ltd for use in manufacture. POR Ltd would have paid excise duty on components manufactured by it and it would have recovered that excise duty in its sales price from ABC Ltd. Now, ABC Ltd has to pay excise duty on toys

manufactured by it as well as bear the excise duty paid by its supplier, PQR Ltd. This amounts to multiple taxation. Modvat is a scheme where ABC Ltd can take credit for excise duty paid by PQR Ltd so that lower excise duty is payable by ABC Ltd. Cenvat (Central Value Added Tax) has its origin in the system of VAT (Value Added Tax), which is common in West European Countries. Concept of VAT was developed to avoid cascading effect of taxes. VAT was found to be a very good and transparent tax collection system, which reduces tax evasion, ensures better tax compliance and increases tax revenue. Modvat (modified value added tax) was introduced in India in 1986 (Modvat was renamed as Cenvat w.e.f. 1-4-2000). The system was termed as Modvat, as it was restricted upto manufacturing stage and credit of only excise duty paid on manufacturing products (and corresponding CVD paid on imported goods) was available