EFFECTS OF
NOTIFICATION DATED 15.11.2013 ON INPUT TAX CREDIT WHICH IS APPLICABLE FROM
01.04.2014
Input tax credit is
the amount which every taxable person who fulfills the conditions is entitled
the claim the benefit of same while discharging his output tax liability. In
other words, it can be said that after calculating the figure of Output tax
liability the taxable person is liable to deposit the tax by deducting the
figure of Input tax credit which taxable person avails under different
circumstances which is explained as under:
(a) INPUT
TAX – As per Section 2 sub-clause (o) of the Punjab Value Added
Tax Act, 2005, “input tax” in relation to a taxable person means value
added tax (VAT), paid or payable under this Act by a person on the
purchase of taxable goods for resale or for use by him in the
manufacture or processing or packing of taxable goods in the State.
(b) INPUT TAX
CREDIT – As per Section 2 sub-clause (p) of the Punjab Value
Added Tax Act, 2005, “input tax credit” means credit of input
tax (in short referred to as ITC) available to a taxable person under the provisions
of this Act.
o Input tax includes tax paid on:
(i)
Purchases of raw material;
(ii)
Goods purchased for
resale;
(iii)
Purchase of capital goods such
as machinery or equipment for use in business;
(iv)
Tools and accessories used in
business; and
(v)
Packing material for
resale and use in manufacture
o Input tax credit or set-off is the
allowance of input tax against the tax payable on the sale and purchase of
goods.
o Net VAT payable by a taxable person is equal
to the output tax payable less available input tax credit.
o for use in the manufacture, processing or
packing of taxable goods for sale within the State or in the course of
inter-State trade or commerce or in the course of export.
Now the Excise &
Taxation Department has introduced new amendment in Section 13(1) w.e.f. 01/04/2014 which has changed the
concept of availing the Input tax credit
After Amendment
Section 13(1) lays down as under:
13. (1) A taxable person shall be entitled to the
input tax credit, in such manner and
subject to such conditions, as may be prescribed, in respect of input tax on
taxable goods, including capital goods,
purchased by him from a taxable person within the State during the tax
period:
"Provided that the input tax credit shall
not be available as input tax credit unless such goods are sold within the
State or in the course of inter-state trade or commerce or in the course of
export or are used in the manufacture, processing or packing of taxable goods
for sale within the State or in the course of inter-state trade or commerce or
in the course of export."
Prior to Amendment
13. (1) A taxable person shall be entitled to the
input tax credit, in such manner and
subject to such conditions, as may be prescribed, in respect of input tax on
taxable goods, including capital goods,
purchased by him from a taxable person within the State during the tax
period:
Provided that such goods are for sale in the State or in the
course of inter-State trade or commerce or in the course of export or for use
in the manufacture, processing or packing of taxable goods for sale within the
State or in the course of inter-State trade or commerce or in the course of
export:
By virtue of this amendment the taxable person can only avail
the input tax credit when such goods are sold or used in the manufacturing
processing of taxable goods mean for sale.
EFFECTS OF THIS
AMENDMENT
The major effect of this amendment is on every business
community as earlier while calculating the output tax liability. The taxable
person deducts the value of Input tax credit by considering the goods which
were lying in the stock but now taxable person cannot avail the Input tax
credit for the goods which were lying in the stock unless such goods are sold
or used in manufacturing or processing.
Conclusion
No doubt that government will get the revenue immediately instead
of getting two or three month later but this change will effect the trade
circles as every dealer has to maintain more records for maintaining such type
of cumbersome accountability which will ultimately create problems both for the
dealers as well as for the officers who has to keep check and to frame
assessments.
Authored by
J S Bedi Advocate
