I recently bought jewellery from a Nashik jewellery shop in exchange of some old jewellery. The cost of new jewellery was Rs. 1,34,000 and after reducing the cost of old jewellery (Rs. 80,000) the net I paid was Rs. 55,608. The jewellery shop charged me VAT of Rs. 1608. They calculated VAT on the total amount of Rs. 1,34,000 @ 1.2%. I entered into an argument with the owner asking him to set off the value of my old jewellery and then calculate VAT. He declined saying that the VAT authorities do not allow this.
I want to ask the forum whether I am right or the jewellery shop owner is right. My argument was based on the following facts -
1) I had already paid VAT on my old jewellery.
2) When I exchanged it against the new jewellery, I should be allowed a set-off of the old jewellery amount before calculating VAT on the cost of new jewellery.
3) I ended up in paying VAT twice on the same jewellery. First I paid VAT on my old jewellery and then I paid VAT on the full cost of new jewellery when it already included the cost of old jewellery.
Isn't this a cheating either by the government or the jewellery shop? As an end-user why should I be put at a position of disadvantage and bear the wrong cost of all intermediates?
I request experts in VAT to answer my query.
Thanks.
- Nitin Brahma
CAclubindia
