Reverse credit of input vat (tnvat)

Manager



Dear Experts,

We are a registered dealer (manufacturer) in Tamil Nadu purchasing materials locally and from interstate and selling the manufactured goods (Garments) both locally and out of the state (interstate).  The interstate sale includes with or without Form 'C'.  While effecting interstate with Form 'C', the CST chargeable is lesser than the local VAT rate and when the interstate sale is without Form 'C', the CST chargeable is equal to local VAT rate.

In this scenario, please let me be clarified on account of the following:

1.  Whether we need to reverse the input tax credit as CST chargeable on the interstate sale with Form 'C' is lessor than the local VAT output tax (5%) and input tax on purchase (5%) 

2. If so, say, we have charged CST 1% on interstate sale with Form 'C' and the input tax credit we have taken on local purchase  is 5%, whether we need to reverse a sum equal to the difference between the ITC and CST charged i.e., 4%.

3. If yes, as we have compensated the revenue loss by 4%, why are we under the obligation of collecting Form 'C' from the customer and submitting the same to sales tax department?

Regards,

Govindarajan R

 

 

 

 

 

 
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ACCT(Retd)



  Mr Govindrajan,

  This matter is simple :1) You will get the input tax credit if you are selling the goods to an interstate registered dealer with 'C' form. 2) You will not get any input tax credit while selling the same to an unregistered interstate dealer or without 'C' form. 3) if you have availed IPT credit already on the goods sold in item 2) you have to reverse it. 4) If you send any of these goods,on which IPT credit have been availed,to outside the state on stock transfer,then,3%(may be 2% now) of the IPT have to be reversed.5) in the first case of interstate sale with 'C' form there will be a benifitt to the dealer as the IPT will be higher than OPT........MJK


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Manager



Originally posted by : MJ Krishnamurthy


  Mr Govindrajan,

  This matter is simple :1) You will get the input tax credit if you are selling the goods to an interstate registered dealer with 'C' form. 2) You will not get any input tax credit while selling the same to an unregistered interstate dealer or without 'C' form. 3) if you have availed IPT credit already on the goods sold in item 2) you have to reverse it. 4) If you send any of these goods,on which IPT credit have been availed,to outside the state on stock transfer,then,3%(may be 2% now) of the IPT have to be reversed.5) in the first case of interstate sale with 'C' form there will be a benifitt to the dealer as the IPT will be higher than OPT........MJK

 

Dear Sir,

Good.  The consequences have been simply explained.  In respect of item no.2 of your reply, I have one more doubt.  Please clarify.

Though we are selling the goods without C form, we are paying the output tax and the output tax is reduced from the input tax credit available while filing the VAT returns.  Since we are paying the output tax at the time sale, why should we reverse once again the input tax credit.  Will it be a double  payment.  please clarify.

 

 

 

 



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sir,

with regards to reversing the ITC for CST sales without  C Form can you please elaborate on how do we effect the entry in the books.I mean which all accounts/ ledger needs to debited and credited.

 
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Deputy Manager - System


with regard to ITC reversal (Interstate sales with Form C) is there any concession for manufacturing industry. Whether there is a difference between manufacturer and trader.
 

 
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ACCT(Retd)



  Mr Govindarajan,

 There is an error in my reply to your query given previously. In sl.no.2 I have mentioned that "You will not get any input credit while selling the same to interstate unregistered dealer or without 'C' form". This is wrong.I do not know how I have made that statement.Please rectify the point that " You are eligible for input tax credit when sales are made to interstate unregistered dealers and without 'C' form."Other statements remain same.I am sorry for inadvertent error and any inconvenience caused to you.

 Mr Munot  I am not an accountant. Pl refer this matter to an accountant or CA.

Mr Radha krishnan. In this matter there is no difference between a manufacturer and a trader,legally.......mjk 

 
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ACCOUNTANT



Originally posted by : MJ Krishnamurthy

  Mr Govindarajan,

 There is an error in my reply to your query given previously. In sl.no.2 I have mentioned that "You will not get any input credit while selling the same to interstate unregistered dealer or without 'C' form". This is wrong.I do not know how I have made that statement.Please rectify the point that " You are eligible for input tax credit when sales are made to interstate unregistered dealers and without 'C' form."Other statements remain same.I am sorry for inadvertent error and any inconvenience caused to you.

 Mr Munot  I am not an accountant. Pl refer this matter to an accountant or CA.

Mr Radha krishnan. In this matter there is no difference between a manufacturer and a trader,legally.......mjk 

 

Dear Sir,

 

Regarding your point no: 2, there is nothing wrong.  The "c" form benefit is to be given only to the registered dealer, who purchase for trading purposes,

Hence, the input credit to be reverse on preportionately as follows

(Total Vatable Purchases/total vatable sales (5% and 14.5% sales+cst 2% +cst 5% sales)*cst 5% sales = Deemed purchase

 

Then deemed purchase *5% to be reverse.

 

Pl ref. worked examples - tn vat 

 

 

 

 

 

 
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Manager Accounts



Dear Sir,

We are a registered dealer manufacturer unit  in Tamil Nadu.
we have purchase the Raw material from- Otherstate 70%  & tamil nadu 30%
we have sales the finished goods to otherstate 90% & 10% tamil nadu.
Other state sales means CST sales2% with C form.
we need to reverse the Credit on purchase with in the state.
 
Please help me in this regards,
 
R.Iyappan
Cell: 9894818701
 
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We are a registered dealer manufacturer unit in Tamil Nadu. we have purchase the Raw material from- Otherstate 70% & tamil nadu 30% we have sales the finished goods to otherstate 90% & 10% tamil nadu. Other state sales means CST sales2% with C form. we need to reverse the Credit on purchase with in the state 

 
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