SAD / VAT
This query is : Resolved
12 May 2010
Manufacturing Solar Lantern(CH No.94055040)which is exempted from ED and VAT is applicable. Inputs imported for manufacturing the above product attracts BCD, CVD and SAD. Since our final product is exempted from ED, we are not availing input credit. Is their any notification to avoid double tax (i.e.SAD on inputs and VAT on final product).Reply from members highly appreciated.
22 July 2025
Regarding your query on SAD / VAT for manufacturing Solar Lanterns (CH No. 94055040):
Your final product (Solar Lantern) is exempt from Excise Duty (ED), so no excise credit on inputs is available.
Inputs imported attract Basic Customs Duty (BCD), Countervailing Duty (CVD), and Special Additional Duty (SAD).
Since your final product is exempted from ED but VAT is applicable on the final product, you are concerned about the double taxation effect of SAD on inputs and VAT on final goods.
Important points:
SAD is basically a countervailing duty (like excise) on imports to maintain a level playing field with domestic products.
There are notifications issued to avoid double taxation or provide relief in certain cases.
In your case, since the finished goods are exempted from excise but VAT applies, SAD on inputs cannot be taken as credit, and VAT is payable on final goods — this creates a cascading effect.
Is there any notification or relief?
As per Central Board of Excise and Customs (CBEC) notifications, SAD is payable on imports, and credit of SAD is generally not available if final products are exempted from excise.
However, some states allow input tax credit of VAT paid on inputs but that depends on state VAT laws.
Unfortunately, there is no central notification explicitly exempting SAD on inputs in such cases, so this is often considered a cost of production.
What you can do:
Verify if your state VAT law provides input VAT credit on inputs (usually it does, but confirm).
Check for any specific exemptions or notifications by customs or state VAT department for solar lanterns or renewable energy products.
You may consult a customs and indirect tax specialist for exploring possibilities of refund or exemption in your specific case.
Your final product (Solar Lantern) is exempt from Excise Duty (ED), so no excise credit on inputs is available.
Inputs imported attract Basic Customs Duty (BCD), Countervailing Duty (CVD), and Special Additional Duty (SAD).
Since your final product is exempted from ED but VAT is applicable on the final product, you are concerned about the double taxation effect of SAD on inputs and VAT on final goods.
Important points:
SAD is basically a countervailing duty (like excise) on imports to maintain a level playing field with domestic products.
There are notifications issued to avoid double taxation or provide relief in certain cases.
In your case, since the finished goods are exempted from excise but VAT applies, SAD on inputs cannot be taken as credit, and VAT is payable on final goods — this creates a cascading effect.
Is there any notification or relief?
As per Central Board of Excise and Customs (CBEC) notifications, SAD is payable on imports, and credit of SAD is generally not available if final products are exempted from excise.
However, some states allow input tax credit of VAT paid on inputs but that depends on state VAT laws.
Unfortunately, there is no central notification explicitly exempting SAD on inputs in such cases, so this is often considered a cost of production.
What you can do:
Verify if your state VAT law provides input VAT credit on inputs (usually it does, but confirm).
Check for any specific exemptions or notifications by customs or state VAT department for solar lanterns or renewable energy products.
You may consult a customs and indirect tax specialist for exploring possibilities of refund or exemption in your specific case.
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