Refund of VAT ITC due to Evaporation loss.
This query is : Resolved
07 February 2025
As per the Gujarat VAT Act, do we need to refund VAT ITC or pay VAT due to excess or more than the admissible limit of evaporation loss on petrol/diesel?
12 August 2025
Key Points:
Evaporation Loss in Petroleum Products
Petrol and diesel are prone to evaporation losses during storage and handling. VAT laws typically allow a certain percentage of permissible loss.
Permissible Evaporation Loss Limit
Under Gujarat VAT (and other state VAT laws), a standard permissible evaporation loss percentage is prescribed for petroleum products (usually around 0.5% to 1%—you need to check the exact figure as per the Gujarat VAT rules).
If Actual Evaporation Loss Exceeds Limit
VAT ITC (Input Tax Credit) claimed on the lost quantity exceeding the permissible limit is required to be reversed/refunded to the tax authorities.
The dealer must pay VAT on the quantity lost in excess of the permissible limit because it is considered a supply/use without payment of tax.
How to Treat ITC and VAT on Excess Loss
The VAT ITC on evaporated quantity beyond permissible limits is not allowed and must be reversed.
VAT on such excess loss quantity is to be paid as tax due.
Documentation and Reporting
Maintain proper records of opening stock, closing stock, sales, purchases, and loss to substantiate the evaporation loss claim.
Evaporation Loss in Petroleum Products
Petrol and diesel are prone to evaporation losses during storage and handling. VAT laws typically allow a certain percentage of permissible loss.
Permissible Evaporation Loss Limit
Under Gujarat VAT (and other state VAT laws), a standard permissible evaporation loss percentage is prescribed for petroleum products (usually around 0.5% to 1%—you need to check the exact figure as per the Gujarat VAT rules).
If Actual Evaporation Loss Exceeds Limit
VAT ITC (Input Tax Credit) claimed on the lost quantity exceeding the permissible limit is required to be reversed/refunded to the tax authorities.
The dealer must pay VAT on the quantity lost in excess of the permissible limit because it is considered a supply/use without payment of tax.
How to Treat ITC and VAT on Excess Loss
The VAT ITC on evaporated quantity beyond permissible limits is not allowed and must be reversed.
VAT on such excess loss quantity is to be paid as tax due.
Documentation and Reporting
Maintain proper records of opening stock, closing stock, sales, purchases, and loss to substantiate the evaporation loss claim.
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