VAT- An Introduction
September 25th, 2006 by Arun Kumar Agarwal
VAT is introduced primarily in replacement of the existing sales tax in many states of India with effect from 1.4.2005. Value Added Tax is a tax on the value added at each stage of production and distribution process and can be referred to as one of the ideal forms of consumption tax since the value added by a firm represents the difference between its receipts from sales and cost of purchases.
The White Paper on VAT was unveiled in January 2005, which outlines the roadmap for levy of an uniform State-level tax on over 500 items. The White Paper would replace the sales tax regime in States with a two-tier tax structure of 4% and 12.5% VAT. Barring a few States, more than 20 States have implemented VAT with effect from 1st April 2005.
The VAT Panel, in the White Paper has relaxed the threshold limit of traders falling under VAT regime from Rs. 5 lacs to Rs. 50 lacs turnover from the previous limits of Rs. 5 lacs – Rs. 40 lacs. Traders within this limit can pay a composite VAT rate of 0.25% but would not be entitled to input tax credit (‘ITC’ hereafter).
States would get 100% compensation of revenue loss, if any in the first year, 75% in the second year and 50% in the third year.
bharat wrote on 03/16/07 at 10:27 am :
Hii,
I am a CS-Final Student having vague knowledge about VAT.
I wuld b thankful if u can answer my query?
?. Vat was implented from 1.4.2005. What about VAT on goods lying in stock on 1.4.2005 susequently sold in the year 2005-06.
Ans.Awaited from u.
urs faithfully,
Bharat
Arun Kumar Agarwal wrote on 03/18/07 at 1:34 pm :
Transitional Credit
Section 22(9) of the West Bengal Value Added Tax Act,2003 prescribes that a registered dealer as referred to in sub-section (1), shall be entitled to input tax credit or input tax rebate on taxable goods, other than capital goods, lying in stock of such dealer on the date on which he became liable to pay tax under this Act irrespective of the fact such dealer has not paid input tax under this Act, in such manner and subject to such conditions and restrictions, as may be prescribed, when such goods are purchased for–
(a) sale or resale by him in West Bengal ; or
(b) sale in the course of inter-State trade and commerce within the meaning of section 3 of the Central Sales Tax Act, 1956 (74 of 1956); or
(c) use as containers or materials for packing of taxable goods intended for sale, in West Bengal or in the course of inter-State trade and commerce within the meaning of section 3 of the Central Sales Tax Act, 1956; or
(d) use as raw materials and consumable stores required for the purpose of manufacture of taxable goods intended for sale in West Bengal or in the course of inter-State trade and commerce within the meaning of section 3 of the Central Sales Tax Act, 1956; or
(e) use as containers or packing materials for use in the packing of goods so manufactured as referred to in clause (d) above; or
(f) use in the execution of works contract; or
(g) use as raw materials and consumable stores required for the purpose of manufacture of any goods to be sold in the course of export under section 5 of the Central Sales Tax Act, 1956 (74 of 1956), and containers or packing materials for use in the packing of goods so manufactured; or
(h) making zero-rated sales other than those referred to in clause (g) above:
Provided further that the burden of proof that such goods are meant for the purposes mentioned in clause (a) to clause (h), shall lie on such dealer.
Rule 21(4) & 22(4) of the West Bengal Value Added Tax Rules,2005 prescribes that a registered dealer intending to enjoy input tax credit or input tax rebate on stock of goods lying on the appointed day, shall, within fifteen days from the date of registration or within the 31st day of August , 2005,shall submit to the appropriate assessing authority, a statement giving-
(a) list of goods other than semi-finished goods and finished goods of a manufacturer lying in stock, where purchase invoice or bill shows the tax separately,
(b) list of goods other than semi-finished goods and finished goods of a manufacturer lying in stock, where purchase invoice or bill does not show the tax separately; and
(c) a break-up of semi-finished goods and finished goods lying in the stock of a manufacturer and the value of raw materials and consumable stores used for manufacturing such semi-finished or finished goods, as the case may be,
in the prescribed format
As per Rule 21(7) After submission of the statement referred to in sub-rule (4) by a registered dealer, the appropriate assessing authority may make an order determining the amount of input tax credit or input tax rebate that the dealer is entitled to enjoy upon such opening stock of goods and if the amount so determined is less than the amount claimed by the dealer in the statement submitted under sub-rule (4), such appropriate assessing authority shall communicate the order to such dealer within the 31st day of December, 2005 :
Provided that if any mistake or incorrect statement is found in the statement submitted by a dealer under sub-rule (4) or in the order of the appropriate assessing authority, as the case may be, resulting in excess claim or excess allowance of input tax credit or input tax rebate in respect of such opening stock of goods, the amount of input tax credit or input tax rebate that the dealer is entitled to enjoy upon such opening stock of goods may be re-determined in accordance with the provisions of these rules.”;
As per Rule 21“(8) Input tax credit or input tax rebate on the opening stock as referred to in sub-rule (1), shall be allowed from the first day of the month following the month in which the statement referred to in sub-rule (4) is submitted by the registered dealer and the amount of such input tax credit or input tax rebate shall not exceed the amount as determined under sub-rule (7)
Provided that if a registered dealer has enjoyed input tax credit or input tax rebate in excess of the amount that the dealer is entitled to enjoy upon such opening stock of goods as determined or re-determined under sub-rule (7), such excess amount shall be reverse credited in the month in which the communication about such determination or re-determination is received by the dealer.”;
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