This action might not be possible to undo. Are you sure you want to continue?
VALUE ADDED TAX
By NIRC of ICAI
18th April 2009
Rakesh Garg, FCA
1 Default! © 2004 By
A Free sample background from www.awesomebackgrounds.com
Input Tax Credit
1. WHAT IS INPUT TAX CREDIT (ITC) The concept of ITC is to replace declaration forms and to collect tax at multi-point. ITC, in general, is the a. Section 9(1) is s ubject to s ection 9(2). b. amount of tax paid/ payable by the purchas er in accordance with the provis ions of the Act c. on eligible local purchas e (not s pecified in Schedule V II) d. aris es in the cours e of his activity as a dealer e. from a local regd. dealer s upported by a „ valid tax invoice‟ e. for the purpos e of us e by him directly/ indirectly in making Local Taxable Sales or inter-State Sale or Export out of India.
A Free sample background from www.awesomebackgrounds.com
Rakesh Garg, FCA
2 Default! © 2004 By
Input Tax Credit
b.ELIGIBLE TAX (for which credit is available): Tax paid under DVAT Act in relation to eligible purchases. Therefore no credit can be claimed for: CST paid or payable on inter-state purchases; Central excise duty or service tax;
Any tax (other than DVAT), whatsoever, paid or payable to the home State or other states or UT.
c. ELIGIBLE DEALERS: Registered under the DVAT Required to be registered under the DVAT Act Exception - Casual dealer and Composition Dealer
A Free sample background from www.awesomebackgrounds.com
Rakesh Garg, FCA
3 Default! © 2004 By
Input Tax Credit
d. ELIGIBLE Goods (for which credit is available): Trading Goods ; Raw Materials ; Packing Material; Cons umables other than fuel; Hire charges s ubjected to DV AT (Except contractors ); Capital Goods (unles ss pecified in Schedule V II) s ubject to res trictions s pecified under s ection 9(9); Components us ed in fabricating the machine in-hous e provided machine is us ed for purpos es s pecified u/ s 9(9)
A Free sample background from www.awesomebackgrounds.com
Rakesh Garg, FCA
4 Default! © 2004 By
Slide 5 Input Tax Credit e. Goods not purchased from a casual dealer or a dealer who has opted for the composition scheme.awesomebackgrounds. Goods purchased for the purpose of making – Local taxable sales. e. ELIGIBLE PURCHASES IN GENERAL Goods purchased for the purpose of business and not for personal consumption. Goods purchased for the purpose of manufacturing taxable goods. FCA 5 Default! © 2004 By A Free sample background from www.g.com .. Exports Rakesh Garg. ITC is not allowed on paper purchased for manufacturing books. Inter-State sales.
the local purchases are assessed as central purchases.com Rakesh Garg. under some circumstances. this is a local purchase A Free sample background from www.Slide 6 Input Tax Credit ITC u/s 9 is available on making the eligible purchases – Holding of tax invoice without making the purchase is not enough • If. second. Khosla‟s case and DCM case • Therefore. first ensure that goods are actually been purchased and.awesomebackgrounds.G. Input Tax Credit would be denied – To illustrate – K. FCA 6 Default! © 2004 By .
PNG.11.2005 – pare parts for repairs and All Automobiles and s maintenance and tyres and tubes thereof. Food and beverages for human cons ic s ys tems . A Free sample background from www. 30. Mus entertainment. fabrics . – Equipments for TV . coal. CNG.f.e. etc.com Rakesh Garg.awesomebackgrounds. Fuels in the form of petrol. clothing umption. dies LPG. el and keros ene.Slide 7 Input Tax Credit f. FCA 7 Default! © 2004 By . Conventional clothing and footwear. amended further w. DV D. Non-Creditable Goods Items are not s pecified in Schedule V II – It is an exhaus tive lis t.
). excavators . generators and electrical ins tallation. air coolers . s tationary items . A Free sample background from www. air conditioning plants or units other Air conditioners than thos e us ed for manufacturing purpos es . furniture. carpets . s anitation equipments . Cranes concrete mixing machines and other s imilar machineries . earthmovers . Non-Creditable Goods (contd…) .awesomebackgrounds. Elevators (lifts . Office equipments advertis ement and publicity materials .com Rakesh Garg. fixtures including electrical fixtures and fittings .Slide 8 Input Tax Credit f. road rollers . FCA 8 Default! © 2004 By . . fans and air circulators . JCB.
Goods purchas ed and accounted for in bus ines s but utilis ed for the facility to the employees . FCA 9 Default! © 2004 By .awesomebackgrounds. Non-Creditable Goods (contd…) Computers other than thos e us ed for the purpos e in normal bus ines s . Goods us ed for cons truction of or incorporation in civil s tructures and immovable goods or properties not cons tituting part of the works contracts .Slide 9 Input Tax Credit f. A Free sample background from www.com Rakesh Garg. Goods for pers onal cons umption or for gifts .
ITC could not be reclaimed since rule 7(2) refers to non-capital goods and sec. ITC is not available on goods specified in Sch. machinery and equipments used directly or indirectly in the process of trade. A Free sample background from www. • ITC is available in three equal instalments and first installment is in the tax period when it is purchased. When the goods are received back in Delhi. 9(6) of the Act. A big issue for works contractors.VII.awesomebackgrounds. FCA © 200410 By Default! . • If capital goods are transferred out of Delhi within three years. supported by a valid tax invoice.com Rakesh Garg. • Goods must be purchased within Delhi from a registered dealer. manufacturing or works contracts in Delhi. than 2% of the purchase price will be reversed. • But.Slide 10 Input Tax Credit INPUT TAX CREDIT ON CAPITAL GOODS • Capital goods means plant.
. on the principal amount. Tax credit in respect of capital goods shall also not be allowed if such capital goods are used exclusively for the purpose of making sale of exempted goods specified in the first schedule. If capital goods are used partly for the purposes of manufacturing and/or trading taxable goods or making exports and partly for other purposes. FCA © 200411 By Default! . A Free sample background from www.Slide 11 Input Tax Credit INPUT TAX CREDIT ON CAPITAL GOODS Depreciation will not be claimed on the amount of ITC availed by the dealer.awesomebackgrounds.e.com Rakesh Garg. i. the amount of the tax credit in relation to such capital goods shall be reduced proportionately.
The buyer/contractee shall adjust his ITC on the basis of such debit note Where goods are returned/rejected by the buyer. the seller must issue to the buyer a debit note. and the amount is subsequently adjusted in output tax by contractor u/s 8.awesomebackgrounds.P. in the T. FCA © 200412 By Default! .com Rakesh Garg. he will reduce his ITC in relation to those goods. when goods are returned/ rejected. Double taxation if goods are returned after 6 month A Free sample background from www.Slide 12 Input Tax Credit ADJUSTMENT IN INPUT TAX CREDIT If the invoice raised by the seller/contractor is passed by buyer/contractee for a lesser amount. issuance of which is mandatory.
12500/. Rakesh Garg. then amount of tax credit shall be reduced proportionately. i.e. he estimated that the raw material would produce 80% taxable goods. At that time. Rs.com . To illustrate.. X purchased raw material for Rs. FCA © 200413 By Default! A Free sample background from www.000 plus tax of Rs.Slide 13 Input Tax Credit PROPORTIONATE REDUCTION IN INPUT TAX CREDIT Where a dealer has purchased goods. 10000/-.00. which are to be used partly for the purpose of making sales referred to u/s 9(1) and partly for other purposes. In such case. 1.awesomebackgrounds. his input tax credit will be restricted only to 80% of Rs. 12500/.for manufacture of taxable as well as exempted goods.
FCA © 200414 By Default! . otherwise the Commissioner is empowered to reject the method or prescribe another method. then the reduction shall be made in the tax period when so used.Slide 14 Input Tax Credit PROPORTIONATE REDUCTION IN INPUT TAX CREDIT If goods are subsequently used for different purposes.awesomebackgrounds. A Free sample background from www.com Rakesh Garg. What is the difference between 9(4) and 10(2) Method of reduction should be fair and reasonable.
w.i.com Rakesh Garg. FCA © 200415 By Default! .Slide 15 Input Tax Credit PROPORTIONATE REDUCTION IN INPUT TAX CREDIT Valuation: – If commodity wise register maintained – At the purchase price – Otherwise – On the basis of the purchase price of such goods immediately preceding their use for other purposes or their FMV. higher A Free sample background from www.e.awesomebackgrounds.
A Free sample background from www.Slide 16 Input Tax Credit STOCK TRANSFER TO OTHER STATES The amount of the tax credit shall be reduced by 2% of the purchase price (1% in case of bullion) if the goods or goods manufactured out of such goods are to be exported from Delhi by way of transfer to a (i) non-resident consignment agent. ITC will be reduced only in relation to those goods where it is claimed or is claimable.e.awesomebackgrounds.com Rakesh Garg. or (ii) non-resident branch of the dealer.. FCA © 200416 By Default! . no reduction shall be made in respect of those goods which are purchased from local unregistered dealers or in the course of inter-State trade. i.
com Rakesh Garg.Slide 17 Input Tax Credit STOCK TRANSFER TO OTHER STATES What is the difference between 9(6) and 10(3) At what value goods to be transferred – At cost or at FMV? It should be the cost since reversal to be made on the basis of purchase price Valuation of stock transfer: – If commodity wise register maintained – At the purchase price – Otherwise – On the basis of the purchase price of such goods immediately preceding their use for stock transfer or their FMV. w.e.awesomebackgrounds. FCA © 200417 By Default! .i. higher A Free sample background from www.
com Rakesh Garg. tax credit already reduced can be reclaimed in the tax period when goods are so received.awesomebackgrounds. FCA © 200418 By Default! . Form F shall also be obtained Where the goods so transferred are received back in Delhi either in the original form or in some other form.Slide 18 Input Tax Credit STOCK TRANSFER TO OTHER STATES In addition. A Free sample background from www.
g. etc.Slide 19 Input Tax Credit GOODS INCORPORATED IN OWN STRUCTURE If goods are used for construction of or incorporation in civil structures and immovable goods or properties not constituting part of the works contracts. FCA © 200419 By Default! .awesomebackgrounds. e. the tax credit claimed in respect of such purchases shall be reduced in the tax period during which such incorporation takes place. A Free sample background from www.. ITC shall be denied on such goods.com Rakesh Garg. cement. bricks. tiles. If goods which have been purchased by a dealer were intended to be used for the purposes specified u/s 9(1) but are subsequently incorporated into the structure of a building owned or occupied by that person.
the credit taken in any earlier tax period shall be reversed in the tax period in which goods are claimed to have been lost or destroyed. input tax credit should not be denied on normal loss arising during the course of manufacture.awesomebackgrounds. However. FCA © 200420 By Default! .com Rakesh Garg.Slide 20 Input Tax Credit GOODS LOST OR DESTROYED Where any goods or goods manufactured out of such goods are lost or destroyed. A Free sample background from www.
awesomebackgrounds. If mandatory. A Free sample background from www. ITC could be claimed only on the basis of tax invoice. FCA © 200421 By Default! .Slide 21 Input Tax Credit Can ITC be claimed on the strength of „Retail Invoice‟ instead of „Tax Invoice‟ – if all other conditions are satisfied – The answer depends whether the provisions of section 50(2) are directory or mandatory.com Rakesh Garg.
on the ground – – He do not have in procession the Original Tax Invoice when goods were purchased : Should state the amount of purchase and claim ITC in subsequent months – He forgot to claim ITC in the original tax period : Since it is an error or mistake – Objection is required A Free sample background from www.awesomebackgrounds.com Rakesh Garg. without filing an objection.Slide 22 Input Tax Credit Can ITC be claimed in the tax period subsequent to the tax period when goods were actually purchased. FCA © 200422 By Default! .
distribution Gift articles. computers.awesomebackgrounds. – Not available in respect of furniture/furnishing of office Schemes.com Rakesh Garg. FCA © 200423 By Default! . etc. ISS and Exports out of India – Capital goods used in the process of trade such as weighing machines. etc.Slide 23 Input Tax Credit-Traders Input Tax Credit can be claimed in respect of – Purchases meant for local taxable sales. delivery rickshaws.? Reversal of input tax credit on account of credit notes? Evaporation Loss? Stock transfers to agents within Delhi ? A Free sample background from www.
FCA © 200424 By Default! . u/s 84 dt.2005 – L.awesomebackgrounds.10. 31.) to customers through scratch cards – debited to sales promotion – No ITC However. etc.Necessary for completion of sale contracts – 2+1 shirt (or) Bucket with detergent (or) Mosquito machine with mats (or) Car + Accessories – Supply of free items is part of sale contract – ITC should be available To be debited to “purchases” instead “sale promotion” Post sale gifts – No ITC/benefit of Form „C‟ available • • • A Free sample background from www.com Rakesh Garg.Slide 24 Input Tax Credit-Traders Free Offers to the Customers – ITC on Purchases • Deter. where gifts are given along with the main product . in our opinion.G. Phone. TV. Electronics – Gifts (Tshirts. AC.
2008 However. 2 dated 7.P. (2009) 19 VST 1 (SC) Priya Agencies vs. State of A.awesomebackgrounds. FCA © 200425 By Default! .Slide 25 Input Tax Credit-Traders • Credit Note resulting in reduction of purchases – Need reversal of ITC by the purchaser even if output tax has not been reversed by the seller u/s 8 – Circular No. CTO (2008) 14 VST 293 (Ker) A Free sample background from www.com Rakesh Garg. Judgments to be referred for contrary answer: Andhra Agencies vs.8.
g. confectionery powder.com Rakesh Garg. • The same analogy might be applied to all trading losses. e. For example – • loss of cement in transit • Waste/scrap generated at the end. FCA © 200426 By Default! . vegetable/fruit waste at the end of the day • Measurement/weighment difference in purchase vis-a-vis sale A Free sample background from www.Slide 26 Input Tax Credit-Traders Goods Lost – ITC on Purchases • Evaporation of oil – No ITC on oil evaporation – Commissioner Ruling u/s 85 – Same opinion by P&H High Court recently Bharat Petroleum Ltd.awesomebackgrounds.
& The agent will claim ITC on the basis of such tax invoice.awesomebackgrounds. F. if that is so.com Rakesh Garg. However. A Free sample background from www. ITC will be claimed by agent without making purchases.Slide 27 Input Tax Credit-Traders STOCK TRANSFER WITHIN DELHI In accordance with Notification No.4(3)/P-II/Noti/ VAT/2005/1158 dated 2nd December 2005 The principal in Delhi will raise tax invoice on agent. FCA © 200427 By Default! . even without substantial provisions: Tax will have to be paid by the principal even without affecting sale and adjustments to be made at the time of return of unsold stock by the agent.
shoes. etc.com Rakesh Garg. such as bulbs. and (ii) without material (purely labor) A Free sample background from www. FCA © 200428 By Default! .awesomebackgrounds. used in the manufacturing plant – Status of goods manufactured at Third Party Unit – (i) With material (some material supplied by Mfr.Slide 28 Input Tax Credit-Manufacturers Input Tax Credit can be claimed in respect of :– Purchases meant for manufacture of goods meant local taxable sales. ISS and Exports out of India including raw material and consumables – Facilities. exhaust fans.
com Rakesh Garg. equipments. etc.awesomebackgrounds. VII ] Normal Manufacturing Loss As per the Advance Ruling by the Commissioner. weighing machines. where scrap generated out of goods manufactured is exempt. then tax credit on the raw material shall be reduced proportionately. A Free sample background from www. FCA © 200429 By Default! . [ Judgments applicable to purchase against form C squarely applies – except goods listed in Sch. machinery.Slide 29 Input Tax Credit-Manufacturers Input Tax Credit can be claimed in respect of – Capital goods used in the process of manufacture such as plant. tools.
awesomebackgrounds. who is engaged in manufacturing of taxable as well as exempt goods.Slide 30 Input Tax Credit-Manufacturers STOCK TRANSFER TO OTHER STATES Where the goods so transferred are received back in Delhi either in the original form or in some other form. then – He will further reduce the amount of ITC as calculated in (i). A Free sample background from www. Where a dealer. transfers certain goods to other States. then – He will first reduce the ITC proportionately in relation to the exempted goods. FCA © 200430 By Default! . in relation to stock transfer to other States.com Rakesh Garg. tax credit already reduced can be reclaimed in the tax period when goods are so received.
A Free sample background from www.awesomebackgrounds. who is exclusively engaged in the business of labour/job work (other than a manufacturer). is not eligible for ITC on purchase of consumables or capital goods. FCA © 200431 By Default! . generated in this process.com Rakesh Garg. a job worker is exclusively engaged in the business of labour job of cutting iron sheets (supplied by the customer) into circles. merely because he is liable to pay tax on sale of any waste/ scrap goods generated during the process of labour job. Even than he is not eligible for tax credit on purchase of any consumable or capital goods used for carrying his labour job. To illustrate.Slide 31 Input Tax Credit-Job Workers A person. He sells scrap. and pays VAT due to the Govt.
FCA © 200432 By Default! .awesomebackgrounds.com Rakesh Garg.Slide 32 Input Tax Credit-Contractors Works contractors can claim ITC on following purchases: Raw Material Consumables which do not get destroyed Packing Material Capital Goods other than those specified in Sch. VII Contractors are deemed either as trader or as manufacturer VAT paid on hire charges and consumable which get destroyed can not be claimed as ITC since these are allowable deductions as labour and services and are exempted sales. ITC on temporary shed/yard/office? Relations between contractor & sub-contractor – (a) If property is tfd. directly on principle of accretion – (b) Otherwise A Free sample background from www.
Swimming Pools etc. equipments used in Jim. Capital goods used exclusively for providing services is not available for ITC..g.g.awesomebackgrounds. Where goods (including capital goods) are used partly for making sale and partly for providing service. A Free sample background from www. e. FCA © 200433 By Default! . common generator used in the restaurant as well as rooms..Slide 33 Input Tax Credit-Service Sector SERVICE SECTOR ALSO ENGAGED IN SALE LIKE HOTELS Input tax is available on those purchases (including rent) which are relatable for making sale by the dealer.com Rakesh Garg. ITC will be available proportionately. e.
Benefit of Input tax credit is not available to leasing company on its purchases even if its sales are taxable in Delhi VAT • Matter is pending before DVAT Tribunal • If that is so purchase from other States against Form C.com Rakesh Garg. paying 2% CST A Free sample background from www.awesomebackgrounds. FCA © 200434 By Default! .Slide 34 Input Tax Credit-Right to Use LESSER (Transfer Of Right To Use Goods) • As per Determination by Commissioner u/s 84 in Digitech .
Slide 35 Input Tax Credit-Right to Use LESSER (Transfer Of Right To Use Goods) Right to use goods. FCA © 200435 By Default! . leasing is covered under the DVAT/CST and is covered in the definition of sale. the local tax paid on purchases should be eligible for ITC against output tax payable on lease rent.com Rakesh Garg.e. Goods which are purchased and hired by the hirer shall be treated as stock in trade and not non-capital goods. A Free sample background from www. goods are purchased by the hirer for the purpose of leasing. i.. Whenever.awesomebackgrounds.
manufacture or execution of works contract in Delhi The lessee will claim in installments on the basis of periodical tax invoices raised by the lesser – Refer Section 105(2)(b). FCA © 200436 By Default! .awesomebackgrounds.com Rakesh Garg.Slide 36 Input Tax Credit-Right to Use LESSEE (Transfer Of Right To Use Goods) The lessee can also claim the benefit of input tax credit if the goods are delivered at Delhi and used by him for the purpose of use in trade. A Free sample background from www.
com Rakesh Garg.awesomebackgrounds. ITC is not available unles s the words “Tax Invoice” are s tated on the invoice. if already regis tered.. N ame.Slide 37 Input Tax Credit . N ame and addres s of the purchas er and his regis tration no. addres s and regis tration number of the s elling regis tered dealer. An individual pre-printed s erialized number and the date on which tax invoice is is s ued. FCA © 200437 By Default! . A Free sample background from www.Records er can claim ITC if he has in his The purchas pos s es s ion a valid tax invoice. t contain: Tax Invoice mus (a) (b) (c) (d) The words “tax invoice” in a prominent place.
Signature of the s elling dealer or his s ervant. FCA © 200438 By Default! . manager or agent.Records (e) Des cription. and N ame and addres s of the printer and firs t and las t s erial number of tax invoices printed and s upplied by him to the dealer. (f) (g) A Free sample background from www. volume and value of goods s old and s ervices provided and the amount of tax charged thereon indicated s eparately. duly authorized by him. quantity.com Rakesh Garg.awesomebackgrounds.Slide 38 Input Tax Credit .
awesomebackgrounds.com Rakesh Garg.Slide 39 Input Tax Credit . it has been clarified that the dealer who has been informed his TIN can is s ues tax invoice from the date of communication of TIN . V ide clarification no. FCA © 200439 By Default! . A Free sample background from www. V AT/ Policy III/ 2005 06/ 898 dated 13th July 2005.Records Explanation to s ection 50(1) of the DV AT Act – A regis tered dealer s hall be authorized to is s ue tax invoice only after certificate of regis tration is is s ued by the Commis s ioner.
provide a copy of s uch las t tax invoice clearly marked as a “duplicate” and SHALL furnis h a copy of s uch undertaking cum indemnity along with his return for the tax period in which s uch “duplicate” tax invoice has been is s ued. A Free sample background from www. FCA © 200440 By Default! .com Rakesh Garg.awesomebackgrounds. the s elling dealer may. upon a reques t made by the purchas ing dealer accompanied by an undertaking cum indemnity in Form DV AT-36.Records Duplicate Tax Invoice: Where a purchas ing dealer claims to have los t the original tax invoice.Slide 40 Input Tax Credit .
or The tax payable in res pect of the s ale exceeds the amount s hown as tax on the tax invoice. containing s uch particulars as may be pres cribed.Records DEBIT AND CREDIT NOTE Where a tax invoice has been is s ued in res pect of a s ale and – (a) The amount s hown as tax in that tax invoice exceeds the tax payable in res pect of the s ale. containing s uch particulars as may be pres cribed. the dealer s hall provide the purchas er with a credit note. (b) A Free sample background from www.awesomebackgrounds. the dealer s hall provide the purchas er with a debit note. FCA © 200441 By Default! .com Rakesh Garg.Slide 41 Input Tax Credit .
as the cas e may be. FCA © 200442 By Default! .Slide 42 Input Tax Credit . and Amount of the variation to the tax amount s hown on the tax invoice. as the cas e may be. A Free sample background from www. addres s and regis tration certificate number of s elling regis tered dealer. Des cription of the reas on for is s uing the credit note or debit note.awesomebackgrounds. N ame and addres s of the purchas er and his regis tration number where the purchas er is a regis tered dealer.com Rakesh Garg. Serial number of the relevant tax invoice affected by the credit note or debit note.Records DEBIT AN D CREDIT N O TE TO be s igned by the pers on authorized to s ign the return and contain the following details :(a) (b) (c) (d) (e) N ame.
Tax Details of input tax calculations where the taxable person is making both taxable and tax free sales. Input Calculations A Free sample background from www.Total input tax. .Total output tax.Records A monthly account specifying . FCA © 200443 By Default! .Slide 43 Input Tax Credit .awesomebackgrounds.Net tax payable or the excess tax credit due for carry forward.com Rakesh Garg. and .
Input Tax Credit is the essence of VAT Regime and legitimate claim thereof is a true saving. A Free sample background from www. FCA © 200444 By Default! . No one to one correlation of purchase and sale is required. To hold a valid Tax invoice at the time of filing of return for claiming ITC is a mandatory requirement.com Rakesh Garg. VII) for the specified purposes made from local registered dealers on the basis of a valid tax invoice.Slide 44 Input Tax Credit TO CONCLUDE Input Tax Credit can be claimed by the dealers for their eligible purchases of creditable goods (other than those listed in Sch.awesomebackgrounds. Unclaimed amount of ITC at the end of the tax period can be carried forward indefinitely or claimed as refund.
awesomebackgrounds.com Rakesh Garg.Slide 45 THANK YOU A Free sample background from www. FCA © 200445 By Default! .