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)

PUBLIC NOTICE REGARDING SINGLE STAGE TAXATION

CLARIFICATIONS REGARDING SINGLE STAGE TAXATION

CLARIFICATIONS REGARDING SINGLE STAGE TAXATION

Excise & Taxation Department has issued a clarification letter in reference to notification no. S.O.116/P.A8/2005/S.8/2005/S.8/2013 & S.O. 117/S.O.116/P.A8/2005/S.8/2005/S.8/2013 & S.O. 117/ P.A.8/2005/S.8/2013 DATED 13 DECEMBER 2013 which was made necessary as the same was issued under section 8(3) & it also clarifies that it has nothing to do with section 8 (c) which deals with optional scheme this notification has in fact increased the rate to 15.95% from 14.30% although department has facilitated the dealers by permitting them to use stamp for a period of one month which is prescribed in the clarificatory letter. Here it is worthwhile to mention that in clarification it was made clear that the notification is applicable only on the goods specifically notified there in. The clarification also castes burden on the dealers to furnish the declaration of stock to avail the benefit of rate of tax prevalent before 01^st January 2014. Moreover it was also clarified that in serial no. 19 of Schedule E only branded items will taxable @ 15.95%.

By virtue of this notification the dealers at the subsequent stages after manufacturers/first importers have to declare their stocks as on 31 December 2013. The dealers at the at the subsequent stages after manufacturers/first importer will continue to pay the tax according to the provision of Punjab Vat Act,2005 on this stock  until completely sold or disposed off. The stock purchased by the dealers at the subsequent stages after manufacturer/ first importer on or after 01^st January 2014, will be tax free at the subsequent stages after manufacturer/first importer’s stage. Copy of the clarification issued by the Excise & Taxation Department is attached. That the matter prescribed for printing on the invoices also reflects ITC available to the tune of Rs.___________ to the subsequent dealers this is just to facilitate where the person is selling the goods of two different schedules then for other schedules leaving aside the single point taxation goods old pattern of VAT will apply as only on few goods single point tax was levied

Clarifications Regarding Single Stage Taxation

Reference Notification No. S.O.116/P.A8/2005/S.8/2005/S.8/2013 and NO S.O 117/P.A.8/2005/S.8/2013 dated 13^th December, 2013

In light of the above notifications we are receiving queries from various dealers and lawyers. In response to this, following clarifications are being issued:

1.     These notifications have been issued under the powers vested in Government under section 8(3) of VAT Act, 2005 to modify the rates of tax.

2.     These notifications have nothing to do with newly introduced section 8-C of Punjab VAT act, 2005 which has provisions for introduction of optional scheme.

3.     In light of these notifications any transactions in the hands of manufacturer/first importer will be taxed at the rates mentioned against these commodities. CST provisions will be applicable on the Manufacturer/First Importer as earlier.

4.     In light of these notifications any transactions in the hands of subsequent dealers will be tax free. So, if any subsequent dealer makes any inter-state sale of the notified goods, the tax liability will be nil and at the same time ITC available will also be nil.

5.     Some lawyers have pointed out that some of the items notified now like tea, bread etc. were earlier taxed on the rates mentioned in Schedule –B or were tax free and covered under Schedule A. But, now after this notification, their rate seems to have been substantially increased to 14.5%. In this context, it is clarified that the above mentioned notifications cover

6.     only those items which were in Schedule-F earlier (13% rate of tax). In case any item was earlier covered in Schedule-B or Schedule A, then that item continues to remain in Schedule-B or Schedule A as the case may be.

7.     Moreover, the words mentioned in the notification – the words “such as”, “like” and “etc.” have been used for further addition of goods in future. This notification is applicable only on the goods specifically notified therein.

8.     10% surcharge is applicable in addition to the tax rates mentioned in these notifications.

9.     Some of the dealers, trade associations, bar council members etc have requested that they need time to change their SAP / ERP systems and will

not be able to print computerized retail invoices at such a short notice. Such dealers are given the time of 1 month to change their systems. But 1^st January onwards all the Tax invoices must be stamped as given below:

The commodities if any taxed at 15.95% (14.5% + 10% surcharge thereon) are under single stage taxation regime. There will be no ITC available to the subsequent dealer i.e wholesalers /distributors and retailers on these commodities.

ITC available to the tune of Rs. ___________________ to the subsequent dealer.

The Subsequent dealer i.e Wholesalers/Distributors and retailers will also mention on his invoice as below:

The commodities at 15.95% (14.5% + 10% surcharge thereon) are taxed at

Manufacturer/First Importer’s Stage and tax free under single stage taxation regime. There will be no ITC available to the subsequent dealer on these commodities.

ITC available to the tune of Rs. ___________________ to the subsequent dealer.

9.     The dealers at the subsequent stages after Manufacturer/First Importer have to declare their stock as on 31^st December, 2013. The dealers at the subsequent stages after Manufacturer/First Importer will continue to pay the tax according to the provisions of Punjab VAT Act, 2005 on this stock

until completely sold or disposed off. The stock purchased by the dealers at the subsequent stages after Manufacturer/First Importer on or after 1^st January, 2014, will be tax free at the subsequent stages after Manufacturer/First Importer’s Stage.

10.        In Serial 19 of Schedule-E, Only Branded items will be taxable under Schedule-E @ 15.95%.

11.  In Serial No. 20 of Schedule-E and 91 of Schedule-A, word or shall be read as and.

Dated:                                                                                                                       Sd/-

Sh. Jaspal Garg

DETC (VAT)

Declaration of Stock

I, ___________________________, Proprietor/Partner/Managing Director/Karta/ Authorized Signatory ____________________ of M/s

___________________________________________________,            Address

___________________________________________________________________

______________________, holding TIN No. __________________, registered under Punjab VAT Act, 2005 since ________________, trading in

________________________________________________________, hereby, declare stock lying on my premises as on 31^st December, 2013 as follows:

Commodities	Quantity	Existing Rate	New  Rate  of	Value	Purchased
		of tax	tax		From
		14.30%	15.95%
		14.30%	15.95%
		14.30%	15.95%
		14.30%	15.95%
		14.30%	15.95%
		14.30%	15.95%
		22.55%	24.75%

I understand that I shall be liable to pay tax on the value addition on the above mentioned stock as per the provisions of Punjab VAT Act, 2005 at the rate of tax prevalent before 1^st January, 2014 as and when I sell/dispose this stock.

Dated: 31^st December, 2013                                         Signature

Name

Address

TIN No.

CONCLUSION:

Excise & Taxation Department has issued a clarification on notification but still there are number of confusions which the dealers are facing as the notification issued is vague beside this the dealers are facing the practical problems as when they purchased the goods which were purchased by the seller prior to 01^st January 2014 then they have to follow the old concept and thereafter in the same invoice when they purchased the goods which were purchased by the seller after 31^st December 2013 then they have to treat it as a tax free items so these type of ambiguous laws are increasing day to day problems for every dealer who is affected by this notification.