23 September, 2015

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Restrictions on Input Tax Credit under Haryana VAT to the Extent of Output Tax in Case of Interstate Sale


Restrictions on Input Tax Credit under Haryana VAT Only to the Extent of Output Tax in Case of Interstate Sale

(Notification No. 22/ST-1/H.A.6/2003/S.59/2015 dated 7th September, 2015)

By CA Ankit Gulgulia (Jain)

Notification No. 22/ST-1/H.A.6/2003/S.59/2015 dated 7th September, 2015 may have been released silently but the impact would not be silent on the Haryana VAT Payers and Buyers of Haryana Goods outside the state of Haryana. The issue is in relation to restricting the input tax credit only to the extent of Output tax liability for dealer engaged in Interstate Sale of Goods.

This simply means say a dealer who has bought an Item at 12.5% by local VAT and sells it to Interstate on Form C @ 2% would have to loose out on the differential input tax credit (on the cost of Material Purchased) and the same cannot be used as credit against other VAT Payable or be claimed as refund under the Act.
Similar restriction is also imposed on the goods used in the manufacture of such goods in the State are sold in such course of inter-state trade or commerce. Further, the restriction is also imposed on when goods are sold at a sale price lower than the purchase price.

This above effect is introduced by Amending the Schedule E of the Act w.e.f 7th September, 2015 and Sl. No. 3(b) of the Said Schedule. The Amended Sl. No. 3(b) of the Schedule E is as under

Description of Goods
Circumstances and Restrictions
Extent of Admissibility of Input Tax Credit
All goods including those mentioned at serial numbers I and 2.
(i) when the goods are sold as such in the course of inter-state trade or commerce; or

(ii) when the goods are used in the manufacture of goods and manufactured goods are sold in the course of inter-state trade or commerce;

(iii) when sold at a sale price lower than the purchase price.
Input Tax to the extent of the amount of tax actually paid on the purchase of such goods in the State under the Act or tax payable on sale of such goods under the Central Sales Tax Act, 1956, whichever is lower.

To the extent of output tax liability, if any, on the sale of such goods.

The same will have a serious cost impact on the traders and accordingly on the buyers outside the state as the lost credit would be cost to the trader and correspondingly buyers outside the state may face higher prices.

Copy of The Notifications as below
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About the Author:

CA Ankit Gulgulia (Jain)
Author is Practicing Chartered Accountant in New Delhi/NCR and specializing in Indirect Taxes, Corporate Laws and Transfer Pricing. He can be reached at ankitgulgulia@gmail.com .

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