VAT credit on Fixed Assset


Biswanath Brahma (Executive-Accounts)     01 October 2010

Biswanath Brahma
Executive-Accounts 
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Hi All,
Can anyone help me on this, my client had purchased a Swift Car, I considered the vat included in its invoice as receivable and adjusted against the VAT payable amount. But, now the CA is telling that He can't claim VAT on purchase of fixed asset, as the asset is not purchased for business purpose.
Please help me out as early as possible, as I have to finalise Balance sheet and submit it to the CA.


Please give notification or clause no. or circualr no. with date if possible

send on my e-mail id:brbiswanath @ yahoo.co.in

Biswanath Brahma

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Pinky Agarwal (Chartered Accountant)     01 October 2010

Pinky Agarwal
Chartered Accountant 
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Dear Biswanathji,

As per my view, you can not claim credit for Purchse of fixed assets as the same is included in negative list and is not entitled for credit. In Negative List it is given that all automobiles including commercial vehicles, and two or three wheelers, and spare parts for repair and maintenance thereof are not entitled for credit. But if the registered dealer is in the business of dealing in such automobiles or spare parts, then he is elligible for claiming input credit for the same.

Regards,

Pinky Agarwal

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Harpreet (* * * * * *)     01 October 2010

Harpreet
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Originally posted by : Pinky agarwal

Dear Biswanathji,

As per my view, you can not claim credit for Purchse of fixed assets as the same is included in negative list and is not entitled for credit. In Negative List it is given that all automobiles including commercial vehicles, and two or three wheelers, and spare parts for repair and maintenance thereof are not entitled for credit. But if the registered dealer is in the business of dealing in such automobiles or spare parts, then he is elligible for claiming input credit for the same.

Regards,

Pinky Agarwal

 Nobody can take credit of such Input VAT as the same are not used for production. You can take only credit of purchase of Plant & Machinery of which used for production.

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Harpreet (* * * * * *)     01 October 2010

Harpreet
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You can read highlighted area as well as everything as the same is for knowledge. 

Most of our Visitors ask and confuse about Input Tax Credit under Value Added Tax. So First I would like to clear that VAT is state Tax, So All state has its own act. But I am given FAQ which are common in all states. I hope that it will clear all your confusion about Input Tax Credit under VAT.

Q.1. What is input tax credit?
A.1. Input tax credit is the amount of tax paid by the dealer on purchases for which the dealer is entitled to claim a credit.

Q.2. How and when input tax credit has to be claimed?
A.2. The input tax credit has to be claimed in the tax period in which a dealer records tax invoice and can be adjusted against tax liability of the dealer on all the sales effected during the said tax period.

Q.3. How does input tax credit work within the overall VAT scheme and whether tax credit is available against liability of tax under CST Act?
A.3. In order to understand how the input tax credit works, following illustrations would be useful:
ILLUSTRATION-1 (Rupees)
Amount Tax
A Purchases during the month @ 12.5% 1,00,000 12,500
B Local sales during the month @ 12.5% 1,20,000 15,000
C Output tax payable 15,000
D Less: input tax credit 15,000
E VAT payable 2,500

ILLUSTRATION-2 (Rupees)
Amount Tax
A Purchases during the month @ 12.5% 2,00,000 25,000
B Local sales during the month @ 4% 1,00,000 4,000
C Inter State sales @ 4% 1.00.000 4,000
D Total output tax liability (B+C) 8,000
E Input tax credit admissible 25,000
E Negative balance of input tax credit carried forwarded to next tax period (B-E) 17,000

Q.4. Can input tax credit of an item be adjusted against output tax on other items?
A.4. There is no “one to one” correlation between input tax credit and output tax of an item. Input tax credit on all items purchased in a tax period can be adjusted against total tax payable during the tax period.

Q.5. Which purchases would be qualified for input tax credit?
A.5. Input tax credit will be available for the taxable goods purchased for the purpose of:

1. Sale or resale within the State
2. Sale in the course of inter state trade or commerce
3. Sale in the course of exports
4. Use as raw materials, processing materials or processing materials in the manufacture of taxable goods
5. Use as packing of goods
6. Sale to SEZ/EOU
7. Transfer out side the State

Q.6. Are there any prohibited goods for which input tax credit will not be admissible?
A.6. Yes. Input tax credit will not be available for crude oil, Lignite, Petrol and High Speed Diesel besides purchases unrelated to goods under sale.
Q.7. How input tax credit will be available in case of branch transfer?
A.7. Input tax credit would be available in case of branch transfer after deducting 4 % as under:

In the case of reseller: 4% of the value of the goods so transferred

In the case of manufacturer: 4% of the value of the goods used in the manufacture of goods so transferred.

Q.8. Whether input tax credit will be available for works contract or transfer of rights to use etc.?
A.8. Yes, the input tax credit will be available in case of works contracts (except capital goods) but it would not be available for transfer of rights to use goods.

Q.9. Whether input tax credit will be admissible for capital goods also?
A.9. Yes. Input tax credit will be admissible for capital goods used in the manufacture of taxable goods. Capital goods must be used continuously for a full period of five years within the State. How ever, no input tax credit would be admissible for capital goods purchased for the use in:

1. Manufacture of tax-free goods
2. Generation of electricity including captive power
3. Works contract

Q.10. Whether input tax credit will be available for fuels used in generation of electricity including captive power?
A.10. No. Input tax credit will not be available in such case.

Q.11. Whether input tax credit will be available for fuels used in motor vehicles?
A.11. No. Input tax credit would not be available in such case also.

Q.12. Whether input tax credit will be available for purchases of motor vehicles?
A.12. No, unless vehicle is purchased for resale.

Q.13. Whether input tax credit will be available on inter state purchases or imports?
A.13. No. Input tax credit will not be available on inter state purchases or imports. Only purchases within the State are qualified for input tax credit.

Q.14. Whether input tax credit is available for the purchases made from a person who is not a registered dealer?
A.14. No. However, purchase tax paid on such purchase is admissible as input tax credit.

Q.15. Whether input tax credit would be available for the purchases made from a dealer paying lump-sum tax?
A.15. No. In such cases, input tax credit will not be admissible

Q.16. Whether input tax credit will be admissible for the purchases made before registration?
A.16. No. In such cases also, input tax credit will not be admissible.

Q.17. Whether input tax credit will be available for the purchases made from the dealer whose registration is suspended or cancelled and his name is published on website of the department?
A.17. No. In such case, no input tax credit will not be admissible for the purchases made from such dealer subsequent to publication of the name of the defaulting dealer on website.

Q.18. What are the other cases/circumstances in which input tax credit will not be admissible?
A.18. In following cases/circumstances input tax credit will not be admissible:

1. where tax is not charged separately
2. the original tax invoice is not with the dealer

Q.19. What is the mechanism for claiming tax credit by Commission Agent and Principal?
A.19. In the normal trade practice, the transaction between the commission agent and principal is not sale purchase transaction. Therefore, no tax invoices can be issued for such transactions. However, for the purpose of claiming tax credit, such transactions shall be deemed to be sales and purchase transactions between the commission agent and principal and they will issue tax invoices to other wherein, they will show the amount of tax paid/payable on such transaction. Commission agent or principal as the case may be, can claim tax credit on the basis of such tax invoices.

Q.20. Whether any proof would be required to claim input tax credit?
A.20. Yes, input tax credit could be claimed only on purchases from dealers registered under VAT. The original ‘tax invoice’ must be preserved carefully. If original tax invoice is lost, duplicate ‘tax invoice’ will be required. Indemnity bond will be furnished for obtaining duplicate tax invoice.

Q.21. Can input tax credit be adjusted against CST payable on inter-state sales?
A.21. Yes, but after adjusting input tax credit against the output tax payable under the VAT if there is any balance of tax credit, such credit shall be adjusted against the CST payable as explained in ‘Illustration 2’ in A-3 above.

Q.22. What are the provisions for refund of input tax credit?
A.22. Input tax credit will be refunded as under:

1. In case of excess input tax credit carried forward, tax credit will be refunded not later than 2 years from the end of the year
2. In case of export, input tax credit will be refunded within 3 months from the end of respective tax period

Q.23. Whether Entry Tax paid by the dealer will be admissible as input tax credit?
A.23. Yes. Entry Tax paid by the dealer will be available as input tax credit.

Q.24. Whether any penalty will be payable for claiming excess tax credit?
A.24. Yes. Penalty equal to tax credit can be imposed.

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CS ,CMA Shambhu Kr. jha (company secretary & ICWAI (Inter))     14 October 2010

CS ,CMA Shambhu Kr. jha
company secretary & ICWAI (Inter) 
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Mr. Bisu

As seemed from your question that your employer has purchased a car for his personal use - there is no provision nor any notifiaction till date that  vat crediit can be taken on consumable goods( in this case it seems that he has purcahsed  car for own use and  and  it will be regarded as consumable goods) . futher vat credit is allowed on capital good but that should be related to/ otr used to for the  productioon of taxable goods .

thanks

Article (Article)     04 October 2012

Article
Article 
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one of my client has purchased a second hand machinery from SEZ.

whether the tax credit of VAT paid on purchase of such machinery is available for set off of vat / cst collected?

Ramchandra Ahivale (Accountant)     07 July 2014

Ramchandra Ahivale
Accountant 
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 if the registered dealer is in the business of dealing in such automobiles or spare parts, then he is elligible for claiming input credit for the same....plase expalin me this..invoice raising dealer must be registere dealr or what??

RAGHU NATH BOREDA (MANAGER(ACCOUNTS))     16 April 2015

RAGHU NATH BOREDA
MANAGER(ACCOUNTS) 
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Dear sir,

We the manufacturers of Taxable Food items, we want to purchase the plant & machinary with local VAT dealer, shall we use input tax, The supplier is saying to use input tax. please help me.

Thanks,

Raghunath Boreda

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Karan Savita   07 July 2017

Karan Savita

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We have purchased car with tax invoice A.y.2009-10 that's show in books and we are not itc claimed from commercial department after we sold this car at par loss then problem creat in The time of assement2015-16 year taxoffice says that pay now charged vat tax 5%. so want to your help for treatment

Stephanie Bale (Interior)     21 January 2019

Stephanie Bale
Interior 
 26 points

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Thank you for sharing. I'm looking for this information. instagram viewer


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