First point tax levied under the Punjab VAT, 2005 on number of other commodities with effect from 01.03.2014

Excise and Taxation department has issued notification no. S.O 17/P.A.8/2005/ S.8/2014 dated 21.02.2014 which is effective from 01.03.2014. This is another notification beside the notification issued on 13.12.2013 effective from 01.01.2014 By virtue of this notification, List of commodities are increased in Schedule E and Schedule A beside amendment in Schedule B. In other words, the scope of levy of First stage tax was increased as department is trying to collect the tax in the hands of Manufacturer and Importer and thereafter subsequent seller will treat the same goods as tax free goods. These type of notification is creating ambiguity in the trade circle as number of dealers who are having the stock on 28^th Feb, 2014 is to maintain and segregate the stocks as per different dates/periods beside this it is strange and astonishing that the same goods are taxable in the hands of one taxable person and tax free in the hands of another taxable person. It clearly reflects that Excise and Taxation Department has unable to maintain the stability in the VAT System and switched over to the notifications which levy the tax on First stage inspite of the fact it is against the basic spirit of the Punjab VAT, 2005

AMENDMENT

EFFECTIVE DATE : 01.03.2014

1. IN THE SAID SCHEDULE “A”

 (a) in serial No. 50 and the entries relating thereto, for bracket and words “(Halwai goods only), the bracket and words “(Halwai Goods except branded snacks)” shall be substituted;

 (b) for serial No. 87 and the entries relating thereto, the following serial Nos.

and the entries shall be substituted, namely:-

 “The following commodities shall be tax free at the wholesaler or distributor or retailer stage provided that tax has already been paid at the first point of sale i.e manufacturer or first importer’s stage:-

 (i) All types of Televisions, Refrigerators, Washing Machines, Microwave ovens, Oven Toaster Grillers (OTGs), Home Theatres, Air Conditioners, Heaters, Blowers, Vaccum Cleaners, Music Systems including CD players, VCD players, DVD players, ROs and Water Purifiers, Dish Washers and Geysers;

 (ii) Kitchen Appliances i.e sandwich makers, tea/coffee makers, juicer mixer grinders (JMGs), hand blenders, electric rice cookers, electric tandoors, induction cook tops, electric chimneys and electric fryers;

 (iii) Cold Drinks, Aerated Drinks and Soda;

 (iv) All types of personal care products i.e deodorants, shaving products, beauty soaps, shampoos, hair oil, conditioners, serums, hair care products, tooth pastes, hand wash, body wash, beauty products, hair gels, bathing gels, talcum powders, creams, anti-persiprants, petroleum jellies, baby care products, skin care lotions, sanitary napkins, after shaving lotion and tooth brush;

 (v) All types of soaps and detergents i.e washing bars and soaps, fabric softeners, bleach, gentle wash, dish wash, color care and Neel;

 (vi) All types of branded and packaged food products i.e chips, wafers, chocolates, toffees, chewing gums and bubble gums, ice creams, Breakfast Cereals, Muesilli, Corn Flacks, pasta, macroni, biscuits, frozen desserts, frozen ready to eat products, meal makers, instant soups , instant noodles, ready to eat products, custard powder, bakery products, baby foods, coffee powder, ice tea, coffee premix, tea premix, jellies, ketchup and spreads;

 (vii) Mineral Water;

 (viii) Processed fruits and vegetables i.e Fruit jams, pickles, fruit squash, paste, fruit drinks, fruit juice (whether in sealed container or otherwise);

 (ix) Roasted or fried grams and groundnuts, namkeens and branded snacks;

 (x) Branded Honey;

 (xi) Branded Atta, Maida, Suji and Besan;

 (xii) Branded Cottage Cheese (Paneer), processed cheese including mozzarella, parmesan and other varieties of processed cheese;

 (xiii) Desi Ghee;

 (xiv) Edible Oils, Vegetable Oil including gingili oil and bran oil;

 (xv) Sweetened Flavored Milk;

 (xvi) Tea excluding Green tea;

 (xvii) Coffee beans and seeds, cocoa pod and chicory;

 (xviii) Drugs and medicines including vaccines, syringes and dressing, mediated ointments produced under drug license, light liquid paraffin of IP and other grades, medical equipments/devices and implants;

 (xix) Branded Spices of all varieties and forms including cumin seed, aniseed, turmeric and dry chillies;

 (xx) Mosquito repellants, toilet cleaners, wood preservatives, chemicals for killing domestic insects, termicides, phenyl and similar other products, which are not used for agricultural purpose;

 (xxi) Tissue papers;

 (xxii) Cups and glasses of paper and plastic;

 (xxiii) Branded Vermicilli. and

 (c ) Serial Nos. 88, 89, 90, 91 and 92 and the entries relating thereto shall be

omitted.

2. IN THE SAID SCHEDULE “B”

 (a) in serial Nos. 12, 21, 29, 31, 33, 41, 88, 98, 109, 117, 127, 155, 156, and

159 and the entries relating thereto, shall be omitted;

 (b) in serial No. 26 and the entries relating thereto, for the words and brackets “cottage cheese (paneer)”, the words and brackets “unbranded cottage cheese (paneer), shall be substituted;

 (c ) in serial No. 48 and the entries relating thereto, for the word “honey”, the words “unbranded honey” shall be substituted;

 (d) in serial No. 81 and the entries relating thereto, the words “tissue paper”

shall be omitted; and

 (e) in serial No. 165 and entries relating thereto, for the words and brackets sevian (Vermicilli), the words and brackets “unbranded sevian (vermicelli)” shall be substituted.

3. IN THE SAID SCHEDULE “E”

(a) for Serial No. 15 and the entries relating thereto, the following serial No.

and the entries shall be substituted namely:-

 These following commodities shall be taxable at the first point of sale i.e

manufacturer or first importer’s stage, at the rates specified against these entries in

the Table given below, namely:-

Sr. No	Commodity Name	Rate of Tax
1	All types of Televisions, Refrigerators, Washing Machines, Microwave ovens, Oven Toaster Grillers (OTGs), Home Theatres, Air Conditioners, Heaters, Blowers, Vaccum Cleaners, Music Systems including CD players, VCD players, DVD players, ROs and Water Purifiers, Dish Washers and Geysers	14.5 per cent
2.	Kitchen Appliances i.e sandwich makers, tea/coffee makers, juicer mixer grinders (JMGs), hand blenders, electric rice cookers, electric tandoors, induction cook tops, electric chimneys and electric fryers	14.5 per cent
3.	Cold Drinks, Aerated Drinks and Soda	22.5 per cent
4.	All types of personal care products i.e. deodorants, shaving products, beauty soaps, shampoos, hair oil, conditioners, serums, hair care products, tooth pastes, hand wash, body wash, beauty products, hair gels, bathing gels, talcum powders, creams, anti- persiprants, petroleum jellies, baby care products, skin care lotions, sanitary napkins, after shaving lotion and tooth brush	14.5 per cent
5.	All types of soaps and detergents i.e washing bars and soaps, fabric softeners, bleach, gentle wash, dish wash, color care and Neel	14.5 per cent
6.	All types of branded and packaged food products i.e chips, wafers, chocolates, toffees, chewing gums and bubble gums, ice creams, Breakfast Cereals, Muesilli, Corn Flacks, pasta, macroni, biscuits, frozen desserts, frozen ready to eat products, meal makers, instant soups , instant noodles, ready to eat products, custard powder, bakery products, baby foods, coffee powder, ice tea, coffee premix, tea premix, jellies, ketchups and spreads	14.5 per cent
7.	Mineral water	14.5 per cent
8.	Processed fruits and vegetables i.e Fruit jams, pickles, fruit squash, paste, fruit drinks, and fruit juice (whether in sealed container or otherwise)	6.25%
9.	Roasted or fried grams and groundnuts, namkeens and branded snacks	6.25%
10.	Branded Honey	6.25%
11.	Branded Atta, Maida, Suji and Besan	6.25%
12.	Branded Cottage Cheese (Paneer), processed cheese including mozzarella, parmesan and other varieties of processed cheese	6.25%
13.	Desi Ghee	6.25%
14.	Edible Oils, Vegetable Oil including gingili oil and bran oil	6.25%
15.	Sweetened Flavored Milk	6.25%
16.	Tea excluding Green tea	6.25%
17.	Coffee beans and seeds, cocoa pod and chicory	6.25%
18.	Drugs and medicines including vaccines, syringes and dressing, mediated ointments produced under drug license, light liquid paraffin of IP and other grades, medical equipments/devices and implants	6.25%
19.	Spices of all varieties and forms including cumin seed, aniseed, turmeric and dry chillies	6.25%
20.	Mosquito Repellants, toilet cleaners, wood preservatives, chemicals for killing domestic insects, termicides, phenyl and similar other products, which are not used for agricultural purposes.	6.25%
21.	Tissue Papers	6.25%
22.	Cups and glasses of paper and plastic	6.25%
23.	Branded Vermicilli	6.25%

(b) in serial Nos. 16, 17, 18, 19 and 20 and the entries relating thereto shall

be omitted.

CONCLUSION

The highlighting feature of this notification is not only to levy the tax at first stage in the hands of manufacturer and importer rather subsequent sale is also made tax free beside this in some entries pertaining to Schedule B scope was extended as the entry pertains to “Halwai” goods, Cottage cheese, Honey and sevian also covers the unbranded category. So it can be safely inferred that day by day Excise and Taxation Department is increasing the scope and rate of tax this ultimately results in increase in prices.

Authored by

J S Bedi Advocate

Office at Jalandhar:
5/13, Central Town, Jalandhar-144001.

 Office at Ludhiana:
Street no. 5, Friends Colony, Jassian Road, Jalandhar Byepass, Ludhiana

Office at Punjab & Haryana High Courts:

Chamber no. 85

Office at Delhi:

Jagdambay Niwas, I-3, Lajpat Nagar-II, New Delhi-110024

Office at Haryana:

112, Phase-I, Industrial Area, Panchkula, Haryana

  

Cell: +91 98140 66336

Phone: +91 181 2457748

   

NOTE ON REDUCED VAT ON IRON & STEEL

Excise & Taxation Department has reduced rate of tax by virtue of notification dated 25 January, 2014 on Iron and steel goods as defined u/s 14 (iv) of Central Sales Tax Act, 1956 from 4.5% to 2.5% except on Non-CENVAT paid scrap. 

Non-CENVAT paid scrap has been made taxable at the rate of 1% only. This change has been made effective from 25.01.2014.

ADDITIONAL TAX

The additional tax i.e surcharge of 10% u/s 8-B of Punjab VAT Act, 2005 will be chargeable extra in addition to the above reduced rate of tax. Thus effective rate of tax after adding surcharge @ 10% on iron and steel goods except Non-CENVAT paid scrap, will be 2.75% and on Non-CENVAT paid scrap it will be 1.1%.

However the term "Non CENVAT paid iron and steel scrap" has not been explained in the notification. CENVAT means Central VAT. It should be noted that CENVAT is never paid but credit of duty paid is considered as CENVAT. In such case what is the meaning of this term is not clear from the notification. 

However in the absence of any such explanation it should mean that if CENVAT credit is taken on Iron and Steel scrap then the rate of tax would be 2.75% and in case CENVAT credit on scrap is not taken then the rate of tax would be 1.1%. This change has been made w.e.f 25.01.2014.

CHANGE IN RATE OF ADVANCE TAX WITH EFFECT FROM 01.02.2014

Punjab Government has also reduced the rate of advance VAT from 4.5% to 2.5% on all iron and steel goods covered u/s 14(iv) of the CST Act, 1956 except wheels, tyres, axles, wheel sets and Non CENVAT Paid scrap. 

 Rate of Advance VAT is One Percent on Non-CENVAT paid scrap. Surcharge is not applicable on the rate of advance VAT.

CHANGE IN CLAIM OF INPUT TAX CREDIT ON IRON & STEEL: It is available only uptill two stages. Important thing to notice which occurred in Rule 21 is the restriction of input tax credit of tax paid on iron and steel goods except wheels, tyres, axles, wheel sets, upto two stages only.

 By notification No. G.S.R.5/P.A.8/2005/S.70/Amd.(53)/2014 dated 25th Jan. 2014 Rule 21 and Rule 54 have been amended.

As per new rule 21(7) input tax credit in the case of iron and steel goods as enumerated in clause-(iv) of section 14 of Central Sales Tax Act, 1956, except wheels, tyres, axles, wheel sets shall not be available unless the purchaser is a first stage taxable person or second stage taxable person.

First stage Taxable person has been defined in Rule 2(dd) as a taxable person who purchases goods directly from:-

(i) the manufacturer registered under the Punjab Value Added Tax Act, 2005

(ii) an importer of goods from outside the State of Punjab.

Second stage taxable person has been defined in Rule 2(hhh) to mean as a taxable person who purchases goods from the first stage taxable person.

 An example can explain the above amendment:

"X" manufactures iron and steel goods and sell it to "Y" after paying tax @ 2.75%, B sells the same goods to "Z". "Z further sells the same goods to "P".

In the above example Input tax credit on the above goods will be available only to “Y” and “Z”. “P” will not be eligible for input tax credit of tax charged by “Z”.

Amendment is not applicable on wheels, tyres, axles, wheel sets covered u/s 14(iv) of CST Act. The amendment is applicable w.e.f 25.01.2014.

Input tax credit on stock restricted: Rule 21(8) of Punjab VAT Rules has also been added which provides that where some goods as input or output are lying in stock of a taxable person and where rate of tax is reduced from a particular date, then from that date, input tax credit shall be admissible to the taxable person on sale of goods lying in stock or on using the goods as input for manufacturing taxable goods, at the reduced rate.

Hence Input tax credit on the stock of iron and steel goods as on 25.01.2014  will be available at the reduced rate of 2.75% and of 1.1% only as the case may be.

Mandatory Certificate Required to be printed on the back of the invoice: Rule 54 of Punjab VAT Rules, 2005 deals with the particulars to be mentioned on a VAT invoice. A new clause (m) in Rule 54(4) has been added, which prescribes a certificate to be printed on the back side of VAT invoice in case of sale of iron and steel goods as enumerated in clause (iv) of section 14 of CST Act, 1956 except wheels, tyres, axles, wheel sets.

Certificate prescribed is in the following format:

Certificate under Rule 54 of PVAT Rules, 2005

(To be printed on the back side of the invoice)    

Certified that in case of goods covered under this invoice:-

___________________________________________________________________________________

                      First Importer      First stage          Second stage                                       Manufacture        TaxablePerson Taxable person

                             (1)                     (2)                 (3)

___________________________________________________________________________________

Name of Taxable person

_________________________________________________________________

TIN

_________________________________________________________________

Commodity

_________________________________________________________________

Weight (in M.T.)

_________________________________________________________________

Invoice No.

__________________________________________________________________

Tax Liability

__________________________________________________________________

With Regards

J.S. Bedi

( Advocate)