05 October 2012
We have purchased raw material with in AP and sales made to SEZ unit, can we claim input VAT credit on raw material purchased in with AP.. Please clarify Thanking you.
01 August 2024
Yes, you can claim input VAT credit on raw materials purchased within Andhra Pradesh when making sales to an SEZ (Special Economic Zone) unit. Sales to SEZ units are typically zero-rated under VAT laws, meaning you do not charge VAT on the sales but can still claim input VAT credit on purchases related to those sales.
### Key Points to Consider:
1. **Zero-Rated Supplies:** - Sales to SEZ units are considered zero-rated. This means you charge zero VAT on these sales but are eligible to claim input VAT credit on the purchases made to produce these goods or services.
2. **Documentation Requirements:** - Proper documentation is essential. You need to maintain: - Purchase invoices showing the VAT paid on raw materials. - Sales invoices to the SEZ unit indicating zero-rated VAT. - Proof of delivery to the SEZ unit, such as shipping documents and receipts from the SEZ unit.
3. **Filing Returns:** - Ensure that your VAT returns correctly reflect these zero-rated sales and the corresponding input VAT credit. Properly document these transactions in your VAT returns to avoid any issues during audits or assessments.
### Relevant Legal Provisions:
1. **VAT Act and Rules:** - Under most VAT Acts, including the Andhra Pradesh VAT Act, sales to SEZ units are zero-rated, and input tax credit is allowable on the purchases related to these sales. - Section 20 of the AP VAT Act and relevant rules may provide specific provisions related to zero-rated sales and input tax credits.
2. **Notifications and Circulars:** - Look out for any specific notifications or circulars issued by the state VAT department regarding sales to SEZ units and input tax credit claims.
### Steps to Claim Input VAT Credit:
1. **Maintain Detailed Records:** - Keep detailed records of all purchases and sales, including tax invoices, proof of payment, and delivery documentation.
2. **File Accurate VAT Returns:** - Accurately report the input VAT credit and zero-rated sales in your VAT returns. Ensure all necessary documents are attached as required.
3. **Consult with Tax Professionals:** - If you're unsure about any aspect, it's advisable to consult with a tax professional or advisor who can guide you through the process and ensure compliance with all regulations.
### Conclusion:
Yes, you can claim input VAT credit on raw materials purchased within Andhra Pradesh for sales made to SEZ units. Ensure you maintain proper documentation and file accurate returns to support your claim. Consulting with a tax professional can provide additional assurance and help navigate any complexities.
CAclubindia
