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22 September 2011

Hi,

Suppose if a person purchase a Yarn as input (which is taxable) & manufacture Cloth from that input , (which is a tax free item), Now the question is that whether the person is required to get himself registered under VAT laws when his turnover exceeds the limit of5 lac.

Thanks & Regards

Vishal

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8 Replies

C.A. Sandeep Wawhal (Chartered Accountant PGDFM BCom.) (1823 Points)
Replied 22 September 2011

Yes, you have to registered with Sales Tax Authority, you have to file sales tax returns showing taxfree sales and taxable purchase which is available for set off.

Prabeer (B. COM (H) CA & CS Final) (5484 Points)
Replied 22 September 2011

No VAT credit if final product is exempt - Credit of tax paid on inputs is available only if tax is paid on final products. Thus, when final product is exempt from tax, credit will not be availed. If availed, it will have to be reversed on pro-rata basis.

Dealers having turnover exceeding 5 lakhs should get themselves registered within 30 days from the date of liability to get registered. (The threshold limit may vary from state to state).

preetam (dude_preetam@yahoo.com) (21 Points)
Replied 22 September 2011

hello sir.......

if i have a choice to study ipcc in delhi and gorakpur...which place should i choose...andwhy sir?

CA Ram (CA) (310 Points)
Replied 23 September 2011

yes, they have to register if turnover exceeds 5 laks.

surender (Manager Accounts) (149 Points)
Replied 23 September 2011

No u can't .Credit of tax paid on inputs is available only if tax is paid on final products. Thus, when final product is exempt from tax, credit will not be availed.

If your turnover exceed from exemption limit. Get Registered with sales tax deptt.

C.A. Sandeep Wawhal (Chartered Accountant PGDFM BCom.) (1823 Points)
Replied 23 September 2011

As per Section 2 (a) of Mvat rule 53 if claiment dealer manufacturing any tax free goods then an amount equal to three per cent of the purchase price of the corresponding taxable goods purchase purchased by him (not being goods treated as capital asset or used as fuel) shall be reduce from the amount of set-off otherwise available in respect of the said purchase.

If your Yarn input is capitalised then full set-off is available

Reduction rate is decided by Central Sales Tax Act u/s 8(1)

MUKESH SHARMA (B.Com , MBA, CS*) (108 Points)
Replied 23 September 2011

You have to registered as sales are going to cross the limit of 5 lakh..

Otherwise not required.. In the absense of Non- reg.. u r not applicable to take advantage of Input Tax & ur cost increase , as the same u are also not authorise to use Tax Invoice means u can't charge sale tax on ur sale..