INPUT TAX CREDIT ON GROSS LOSS ARISING, IF ANY FROM SALES WILL BE REVERSED UNDER PUNJAB VAT ACT 2005

[AMIT BAJAJ ADVOCATE]

The Excise and Taxation Department, Government of Punjab has amended rule 21 of Punjab VAT rules to add sub rule 2-A in the said rule to provide for that ITC shall be allowed to a taxable person to the extent of tax payable on the resale value of goods or sale value of manufactured/processed goods where such goods are sold below the purchase price in case of resale or cost price in case of manufactured/processed goods. The balance ITC shall be reversed.

Implications of the ammendment: The implications that follow from this amendment are that now if a person sells goods below the purchase price in case of traded goods and below the cost price in case of manufactured goods then the resultant excess ITC that will arise due to loss that arises will have to be reversed. In other words ITC will be available only upto the sale or resale value of the goods in question.

For example: if a good costing Rs 200 is sold at Rs 190 by ‘A’ at a loss of Rs 10 then input tax credit will be available only on 190 even though tax has been paid on 200 by ‘A’ while purchasing such good and input tax credit on Rs 10 will have to be reversed.

The said notification is reproduced herebelow for ready reference which is also available at the official website of the Excise and Taxation Department, Punjab:

 GOVERNMENT OF PUNJAB

 DEPARTMENT OF EXCISE AND TAXATION

 (Excise and Taxation II Branch)

 NOTIFICATION

 The 8^th November 2010

NO. G.S.R.     /P.A.8/2005/S.70/Amd.(   )/2010- In exercise of the powers conferred by sub-section (1) of Section 70 of the Punjab Value Added Tax Act, 2005 (Punjab Act No. 8 of 2005), and all other powers enabling him in this behalf, the Governor of Punjab is pleased to make the following rules, further to amend the Punjab Value Added Tax Rules, 2005 , namely:-

 RULES

 1.     (1) These rules may be called the Punjab Value Added Tax (_______ Amendment) Rules, 2010.

        (2)  They shall come into force on and with effect from the date of their publication in the Official Gazette.

2.     In the Punjab Value Added Tax Rules, 2005 in rule 21, after sub-rule (2), the following sub rule shall be inserted, namely :-

          “ (2-A)         Input Tax Credit shall be allowed to a taxable person to the extent of tax payable on the resale value of goods or sale value of manufactured/ processed goods where such goods  by the taxable person are sold at a price,-

 

       (i)           Lower than purchase price of such goods in the case of resale; or

       (ii)          Lower than Cost price in the case of manufactured/Processed goods; and in such cases the balance Input Tax Credit (ITC) shall be reversed by the taxable person.”

 

        SHIVINDER SINGH BRAR

                                                                    Financial Commissioner Taxation and 

        Secretary to Government of Punjab

                                                                    Department of Excise and Taxation.