Reversal of vat credit

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S.HARIHARAN

Sr.Executive

23 Points Posted on 19 November 2013

Dear All

We have the latest vat credit amended wherein we need to reverse vat credit the rule is provided below. Can anybody guide me the logic/formula to be adopted and what is the % is to be reversed.

1. Amendment of Section 19- Whenever CST sale is made under Section 8(1) of the CST Act, 1956, the proviso to Section 19(2)(v) as amended seeks to restrict the [ITC] input tax credit by providing that credit shall be allowed in excess of 3%. This means that if local purchases attract 5% or 14.5% VAT and the output is sold on CST basis falling under Section 8(1) of the CST Act, the reversal would be to the extent of 3%.

Thanks

S.Hariharan-Chennai

Replies (3)

amit

AS USUAL

38 Points Posted on 19 November 2013

You cannot take the input credit on local purchases to the extent of 3% on CST sales

Greeshma

Chartered Accountant

25 Points Posted on 29 January 2014

1. Identify the 5% VAT inputs attriibutable to the CST sales as:

Total Input purchase made at 5% VAT divided by Total Sales multiplied by CST Sales.

2. The amount to be reversed is 3% of the VAT on inputs which are used on CST sales. If you apply 3% on the value as arrived above, you will get amount to be reversed on 5% input purchases.

3. Similaly compute the amount to be reversed for 14.5% VAT category purhcases.