Credit against Computer Software

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Rakesh (Querist)
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30 December 2009 Hi,

We are the retailer & recently we had purchase a computer software from XYZ vendor. He had charged a VAT in his invoice. Can we avail the benifit of Vat against the Vat payable under Maharashtra Vat rule?

CA.SHAHZAD SAYYED

CA.SHAHZAD SAYYED (Expert)
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30 December 2009 Dear Rakesh
There is a Provision for getting VAT credit paid on Office Furniture & Capital Asset after deduction.
But i advice you instead of taking credit you just take the whole cost (including VAT paid) of Software to P/L A/c as it is permissible under sec 32 of IT to avail 100% Dep. on Software.

Murtaza I Bhagat

Murtaza I Bhagat (Expert)
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30 December 2009 totally agree.

Rakesh

Rakesh (Querist)
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30 December 2009 Dear Sir,

There are two scenario,

1.When software cost is Capitalised
2.When software cost is charged to P & L A/c

In first case, the software cost is been capitalized. If we are able to take the Vat credit, definitely it will help me in saving the cost as well as fund of the company
For Example- Software cost is 10000 + 400 is the vat. Aggregate value of the invoice is 10400/-. Here I can capitalized Rs 10300/- since there is a provision in MVAT for deduction of 3% if we are capitalizing the cost. However I will get the benefit of Rs 100/- which I can set off the same against the Vat payable for that particular month

In this second case, the software cost is been charged to P & L A/c. If we are able to take the Vat credit, than in this case I will be able to save more Cost & Fund of the company. For Example- Software cost is 10000 + 400 is the vat. Aggregate value of the invoice is 10400/-. Here I will charges Rs 10000/- to P & L & will take the benefit of Rs 400/- which I can set off the same against the Vat payable for that particular month.

My query is that whether we can take the credit of VAT against software cost?

CA.SHAHZAD SAYYED

CA.SHAHZAD SAYYED (Expert)
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30 December 2009 Dear Rakesh
if you are taking Credit of Vat paid on software Rs.300 then you can Debit to P/L a/c or Capitalised the Software cost of Rs.10000, here there is a loss of Rs.100.
in second case as you told Charge Rs10000 to P/L A/c & take the Vat credit of Rs.400, it is not possible bcoz as per MVAT Act there must me deduction on vat paid so straight way there is a loss of Rs.100.

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