what is E1 and E2 sale and Purchase? E-1, E-2 are the names of the forms issued for declaring that the goods are sold/purchased in transit.
A detailed explanation 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 5% for each states is payable.
However, if the goods are redirected or endorsed by a different party then to avoid multiple taxations, this sale in transit is applied.
(An example to explain this)
A trader Mr. Avinash at Uttaranchal wants to buy some machinery, he contacted that machinery expert Mr. Arish of Delhi, now Mr. Arish can’t find that machine in Delhi, but he has a friend Mr. Satpaal of Kolkata who manufactures that machine. So, in this case, Mr. Arish of Delhi will ask Mr. Satpaal of Kolkata to sell it to him, but deliver it to Mr. Avinash at Uttaranchal. And Mr. Arish will receive an invoice from Mr. Satpaal (with his name as a buyer and Mr. Avinash name as consignee). The goods will go directly to Mr. Avinash at Uttaranchal, however, he will be billed by Mr. Arish (with Mr. Arishs profit of course). BUT MR ARISH WILL NOT ADD ANY SALES TAX ON HIS BILL TO MR AVINASH. And this is the interesting part, that since goods have been taxed at 5% at source from Mr. Satpaal of Kolkata they will not be further charged any tax. This will save tax to Mr. Avinash at Uttaranchal from being taxed at Delhi•
Now comes the forms part.
In this example, Mr. Avinash of Uttaranchal will issue a C Form to Mr. Arish of Delhi, and Mr. Arish to Mr. Satpaal AND MR SATPAL WILL ISSUE AN E-1 FORM TO MR ARISH 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. Arish in above example) has to issue an E-2 form to the subsequent purchaser (Mr Avinash at Uttaranchal in above example)