Bookmarks   Feedback   Annual Subscription   New User   Login  
Tax Management India .com   
   TMI - Tax Management India. Com   
AO cannot re-open assessment merely for non filing of ITR unless the total income is exceeding maximum amount which is not chargeable to tax    *    Applicability Of Service tax on Liquidated Damages    *    Goods and GST Bill passed    *    WITH GST CONSTITUTIONAL AMENDMENTS, WHAT NEXT ?    *    determination of assessable value for job work transaction    *    CENVAT CREDIT    *    Excise Cenvat credit on Electricity Power bill    *    Employees sent on deputation to subsidiary/ associate companies (Service Tax)    *    GLOW SIGN AND HOARDING    *    Service tax exemption for transportation of life saving medicines    *    Regarding cenvat credit on service tax on rent a cab    *    Potato Chips as Namkeen    *    Central Excise Exemption of ₹ 150 Lakhs    *    Cenvat credit on water treatment plant    *    Cenvat Credit - refund - export of services - The registration is not the sole criteria for granting refund, so long the other conditions are satisfied, refund shall be granted - Tri    *    CENVAT credit demo cars capital goods input nothing is demonstrated today that a demo car falls in any of the Chapters dealing with capital goods - credit cannot be allowed - Tri    *    Period of limitation - in case duty was required to be paid on the strips, the appellant was entitled to avail credit of duty paid on the granules, which would have neutralized the entire demand on the strips - in this Revenue neutrally background, there could be no malafide on the part of the appellant to evade duty - Tri    *    Validity of statutory provisions - Imposition of penalty on company and directors - he legislature while in view of such situation has granted discretion to the executive, at the same time, provided for sufficient guidelines and safeguards so that such discretion does not convert into arbitrary or discretionary exercise of powers - HC    *    Strengthening Our Debt Markets (Dr. Raghuram G. Rajan, Governor - August 26, 2016 - at Annual Day Address to Foreign Exchange Dealers Association of India, Mumbai)    *    Violation of Clause 49 of the Listing Agreement - whole Time Director chaired the Audit Committee Meeting - levy of penalty of ₹ 5 lac cannot be said to unreasonable or excessive - SAT    *    Tribunal was right in confirming the set-off of MAT Credit under Section 115JAA brought forward from earlier years against tax on total income including surcharge and education cess instead of adjusting the same from tax on total income before charging such surcharge and education cess - HC
Article Section
Home Articles Value Added Tax - VAT and CST RUPESH NAGPAL
← Previous Next →


Submit New Article

Discuss this article

December 2, 2010
  • Article

Guidelines for Input Tax Credit (ITC)

1. Input Tax Credit is very vital to the concept of Value Added Tax system. Input tax is the tax that a taxable person has paid on his business purchases.

2. Section 13 of the Punjab VAT Act, 2005 deals with Input Tax Credit. The system of credit on input tax paid is tax-based. It is a major check on leakage of tax.

3. Input Tax includes tax paid on :

(i) Purchases of raw material; (ii) Goods purchased for resale; (iii) Purchase of capital goods such as machinery or equipment for use in business; (iv) Tools and accessories used in business; and (v) Packing material for resale and use in manufacture.

4. Input Tax Credit is available only on purchases made from taxable persons holding VAT registration number, in the State.

5. Input Tax Credit can be claimed only by a taxable person holding VAT registration number on the basis of ORIGINAL VAT INVOICE received from seller.

6. Taxable persons can not claim Input Tax Credit for the following goods unless they are in the business of dealing in these goods:

i)      Automobiles including commercial vehicles, three wheelers and two wheelers and spare parts thereof;

ii)      Food, beverages and tobacco products;

iii)     Petroleum products;

iv)     Goods used for personal consumption or gifts;

v)     Goods used in manufacture, processing and packing of tax free goods;

vi)     Office equipment and building material;

vii)    Air-conditioning units except where air-conditioning is essential in the manufacturing process of taxable goods;

viii)   Weigh bridge except when installed inside the manufacturing premises for use in the process of manufacturing;

ix)     Goods used in manufacture, processing or packing of tax free goods;

x)     Goods used in generation and distribution of electrical energy; and

xi)     Goods which remain unsold at the time of closure of business.

7. If a taxable person is making taxable and tax free sales, he would be entitled to claim input tax proportionate to his taxable sales using the following formula:

(A x B) / C

A : Total amount of input tax for the period.

B : Total value of taxable sales for a period including zero rated sales, excluding VAT.

C : Total value of sales including tax free sales, excluding VAT.

8. A taxable person can claim input tax credit with return for each tax period. If the claim for input tax credit exceeds the amount of output tax in that return, input tax credit shall be carried forward to next return period.

9. The net tax payable by a VAT dealer claiming input tax credit shall be:

Output tax - input tax = net tax.

Input tax shall include the input tax credit carried forward from previous return period.

10. Input tax credit is non-transferable i.e. it cannot be transferred from one taxable person to another.

11. Section 14 of the Punjab VAT Act,2005 provides for input tax credit on the tax paid under sec. 5(1-A) and on Schedule D goods under the PGST Act, 1948 during the past one year. Taxable person shall be entitled to claim Input Tax Credit on the goods in hand on the appointed day if the purchases were made within twelve months prior to the appointed day and the goods have suffered tax under the PGST Act, 1948. However, all taxable persons having stock of tax paid goods on the appointed day shall have to get their stocks authenticated, by submitting details in prescribed performa upto 30.04.2005, and getting the same verified from the concerned Assessing Authority and produce/secure documentary evidence of tax paid on such stock.

12. ITC is not available for exempted units. Instead an exempted unit is entitled to refund of tax paid or payable by it on purchases made from a taxable person with in the State, for use in manufacturing, processing or packing of taxable goods. This refund is available only if the dealer having Exemption has filed correct returns as per provision of the rules of 1991. The unit shall make an application for refund


By: RUPESH NAGPAL - December 2, 2010



Discuss this article



← Previous Next →
what is new what is new

Advanced Search

Latest Updates




More Options


|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map || ||

© [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version