Mvat

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 October 2014 WE PURCHASED MATERIAL FROM SOME XYZ CO. N WE TOOK VAT INPUT CREDIT ON PURCHASED BUT XYZ CO. DINT PAY THE TAX (VAT) ON SALE..SO WE GOT NOTICE FROM SALE TAX TO PAY THE TAX (VAT) OF WHICH YOU HAVE TAKEN INPUT CREDIT..SO WHY THE HELL SHOULD I BEAR THE BURDEN OF TAX WHERE AM NOT WRONG ITS MY RIGHTS TO INPUT CREDIT ON PURCHASE NA THEN?? PLEASE GUIDE ME WHAT SHOULD I DO???

Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2014 NO ONE CAN HELP ME IN THIS MATTER????

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2024 This is a common issue in VAT systems where a business claims input credit on purchases, but the supplier has not remitted the VAT collected on sales to the government. The problem arises when the tax authorities trace discrepancies and issue notices for payment of tax based on the input credit claimed. Here’s how you can handle this situation:

### **1. Understand Your Liability:**

Under VAT laws, the responsibility for paying VAT on sales rests with the supplier. However, if the supplier fails to remit the VAT, the buyer may sometimes be held liable to pay the VAT on the input credit claimed, depending on the specific VAT regulations and provisions in your jurisdiction.

### **2. Steps to Address the Issue:**

#### **A. Review the Notice:**
- **Examine the Details:** Carefully review the notice issued by the Sales Tax department to understand the specific reasons and amounts mentioned.
- **Check for Errors:** Ensure there are no errors in the notice, such as incorrect amounts or details.

#### **B. Verify Supplier Compliance:**
- **Contact the Supplier:** Reach out to the supplier (XYZ Co.) to confirm whether they have paid the VAT and to request evidence of payment.
- **Obtain Proof:** Ask for a copy of the VAT payment receipt or challan from the supplier. Sometimes, the issue may arise from an error or delay in the supplier's filing.

#### **C. Respond to the Notice:**
- **Prepare a Reply:** Draft a detailed reply to the notice. Include evidence of the VAT paid by you, proof of the supplier's default, and any supporting documents.
- **Attach Documents:** Include copies of purchase invoices, payment receipts, and correspondence with the supplier.

#### **D. Seek Redressal:**
- **File an Appeal:** If you believe the notice is unjustified, file an appeal with the appropriate VAT authority. Provide a detailed explanation and evidence supporting your claim.
- **Request for Relief:** You may request relief based on the principle that the burden of the VAT should not fall on you if you have complied with the input credit rules.

#### **E. Ensure Future Compliance:**
- **Due Diligence:** Verify the compliance of suppliers before making purchases. This can include checking their VAT registration status and past compliance records.
- **Maintain Records:** Keep thorough records of all VAT transactions and communications with suppliers to safeguard against similar issues in the future.

### **3. Legal and Professional Advice:**

- **Consult a Tax Professional:** Engage with a tax consultant or legal advisor who specializes in VAT matters. They can offer tailored advice and assist in responding to notices and appeals.
- **Review Legal Provisions:** Familiarize yourself with the specific VAT laws and provisions in Maharashtra or your jurisdiction. This includes rules related to input credit, supplier compliance, and buyer liabilities.

### **4. Possible Outcomes:**

- **Supplier Pays Tax:** If the supplier remits the VAT and provides proof, the issue may be resolved, and you may not have to bear the burden of the tax.
- **Adjustment or Refund:** In some cases, you may be eligible for an adjustment or refund if you have already paid the VAT due to the supplier’s default.

### **Summary:**

While the general principle is that input credit should not be denied due to the supplier's non-compliance, VAT laws often require you to ensure that input credits are claimed based on valid and compliant transactions. Address the issue promptly, maintain thorough documentation, and seek professional advice to navigate the situation effectively.

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