My client has stores purchase @ 14.5% Vat where he has only 5% Vat sales,Now can he claim entire 14.5% Vat paid on stores purchase as Input Tax Credit?or Limited to 5%?If so entire credit,my doubt is,if we allow entire 14.5% against 5% Vat sales,Doesn't it lead to provide more benifit than he has actually had.For example,if he purchase of stores worth 10000 by paying 1450 as vat and he consume entire stores and included in cost of goods sold @ 5% Vat then he would collect again 5% on rs 10000 in which he had previously collected which would lead to cascading effect,so we allow vat paid on stores as Input Tax Credit,if we provide for entire 14.5%,then it will reduce even vat payable on value added for other than rs 10000?i.e cascading effect would be rs 500(i.e rs10000*5%),so benifit should be given to rs500 but if entire 14.5% is given then benifit would be more than cascading effect?
CAclubindia
