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Reversal of vat credit

S.HARIHARAN (Sr.Executive ) (55 Points)

19 November 2013

Dear All

We have the latest vat credit amended wherein we need to reverse vat credit the rule is provided below. Can anybody guide me the logic/formula to be adopted and what is the % is to be reversed.

1. Amendment of Section 19- Whenever CST sale is made under Section 8(1) of the CST Act, 1956, the proviso to Section 19(2)(v) as amended seeks to restrict the [ITC] input tax credit by providing that credit shall be allowed in excess of 3%. This means that if local purchases attract 5% or 14.5% VAT and the output is sold on CST basis falling under Section 8(1) of the CST Act, the reversal would be to the extent of 3%.

Thanks

S.Hariharan-Chennai

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3 Replies

amit (AS USUAL) (34 Points)
Replied 19 November 2013

You cannot take the input credit on local purchases to the extent of 3% on CST sales

Greeshma (Chartered Accountant) (37 Points)
Replied 29 January 2014

1. Identify the 5% VAT inputs attriibutable to the CST sales as:

Total Input purchase made at 5% VAT divided by Total Sales multiplied by CST Sales.

2. The amount to be reversed is 3% of the VAT on inputs which are used on CST sales. If you apply 3% on the value as arrived above, you will get amount to be reversed on 5% input purchases.

3. Similaly compute the amount to be reversed for 14.5% VAT category purhcases.