Sale of Goods Act Section 64A — In contracts of sale, amount of increased or decreased taxes to be added or deducted
CHAPTER VII MISCELLANEOUS
Commercial / Corporate
Summary
Sub-section (1) sets out the general rule for what happens when a tax on goods changes after a sale contract is made. This rule applies unless the contract itself says something different. It covers situations where a tax is newly imposed, increased, decreased, or removed after the contract was signed, and where the contract did not already specify who pays the tax. If no tax was chargeable when the contract was made, the rule applies to goods sold without any tax arrangement. If tax was chargeable at that time, the rule applies to goods sold as tax-paid.
Under clause (a) of sub-section (1), if a tax is imposed or increased and the seller actually pays or becomes liable to pay the tax or the increased amount, the seller can add an amount equal to that tax or increase to the contract price. The seller is then entitled to be paid that added amount and can sue to recover it.
Under clause (b) of sub-section (1), if a tax is decreased or removed and only the reduced tax or no tax at all is paid or payable, the buyer can deduct an amount equal to the decrease or the removed tax from the contract price. The buyer is not liable to pay that deducted amount and cannot be sued for it.
Sub-section (2) lists the specific types of taxes to which the rules in sub-section (1) apply. Under clause (a), this includes any customs duty or excise duty on the goods. Under clause (b), this includes any tax on the sale or purchase of the goods.
Official Text
(1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax-paid where tax was chargeable at that time,—
(a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition; and
(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction.
(2) The provisions of sub-section (1) apply to the following taxes, namely:—
(a) any duty of customs or excise on goods;
(b) any tax on the sale or purchase of goods.]