Clarifications Regarding Single Stage Taxation by Excise and Taxation Department

0 comments Monday, December 30, 2013



Reference Notification No. S.O.116/P.A8/2005/S.8/2005/S.8/2013 and NO S.O 117/P.A.8/2005/S.8/2013 dated 13th December, 2013

In light of the above notifications we are receiving queries from various dealers and lawyers. In response to this, following clarifications are being issued:
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Punjab Voluntary Disclosure of Value Added Tax Scheme, 2013

0 comments Friday, December 27, 2013
GOVERNMENT OF PUNJAB
DEPARTMENT OF EXCISE AND TAXATION
(EXCISE AND TAXATION-II BRANCH)

Dated: 20th December, 2013

Whereas with a view to bring in greater transparency in the discharge of tax liabilities by a taxable person under the Punjab Value Added Tax Act, 2005 (Punjab Act No.8 of 2005), it is considered necessary so to do, now, therefore, in exercise of the powers conferred by section 29-A of the aforesaid Act and all other powers enabling him in this behalf, the Governor of Punjab is pleased to notify the scheme for settlement of unpaid tax, namely:-
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Implications of tax levied at first point of sales on certain goods under Punjab VAT

0 comments Thursday, December 26, 2013
In this article the implications of a latest amendment in the Punjab VAT Act, 2005 are analysed, whereby system of single point of taxation has been introduced in respect of certain goods by two notifications dated 13.12.2013, applicable w.e.f 01-01-2014.

By notification no. S.O.116/P.A8/2005/S.8/2005/S.8/2013 dated 13-12-2013 certain goods have been made tax free and the pre-condition for such goods to become tax free is that tax has already been paid at the first point of sale i.e manufacturer or first importer’s stage.

By notification No. S.O 117/P.A.8/2005/S.8/2013 dated 13-12-2013 the same goods which have been made tax free, have been made taxable at special rates of 14.5% and 22.5% at the first point of sale of such goods i.e. first manufacturer or first importer's stage.

Single point of taxation is not an optional levy on MRP under newly added section 8-C: During past few days many people have raised query whether such levy of tax at the first stage of sale is a levy under newly added section 8-C which purposes to levy an optional tax on the MRP of certain goods whereby subsequent sales will be exempted from tax.

It should be noted that the above levy on the first stage is not a levy on the MRP of the goods and nor the notification has been issued u/s 8-C, rather the above notifications have been issued u/s 8(3) of PVAT Act, which means that the above said levy on the first point of sale is mandatory in respect of the all the taxable persons and the levy on the first stage is not an optional levy on MRP under newly added section 8-C of Punjab VAT Act, 2005.

Tax implications of Stock existing as on 31.12.2013: Another question which frequently coming into everybody's mind is that what will be the status of the stock of such goods lying on 31-12-2013 which have been made taxable at the first stage of sales in the above notification .

To find out answer to the above question, one will have to answer certain questions.

First question: whether the said notification No. 116 while imposing the condition of tax being paid at the first point of sale for making such goods as tax free, refers to the tax paid on the first point of sale payable at the rates as mentioned in the later notification No. 117 or tax paid on first point of sales at any rate as existing before 31-12-2013.

The answer to the above question has not been given in any of the notifications no. 116 or 117. In the absence of any clarification, as per the rule of strict construction, it should be presumed that notification is referring to tax at any rate i.e rate existing before 31-12-2013 and also after 31-12-2013.
 
Second question: Thus going by above interpretation, the next question is whether stock of such goods as being made taxable at first point of sale in the above said notifications, as existing on 31-12-2013, whether have suffered tax at first stage of sale?

Before the above said notifications no. 116 and 117, the goods notified therein suffered tax at all stages including the first stage of sales, as per the multiple point of taxation system of VAT.

Therefore the stock of such goods as existing on 31-12-2013, have definately suffered tax on the first stage of sales, if they were purchased from within the State of Punjab at a stage later than the first stage of sales, thus once the goods have suffered tax at the first stage of sales, such tax at first stage must also have been paid either by cash or by adjustment of credit of tax paid on the inputs.

Thus concluding, the stock of such goods (which have been made taxable at first stage of sale), as existing on 31-12-2013 should also be treated as tax free after 01-01-2014 as per notification No. 116, (if the same were purchased at a stage later than the first stage of sales in Punjab) as the condition of tax being paid at the first stage of sales stands fulfilled in case of goods remaining in stock on 31-12-2013.

In case if the stock of such goods as existing on 31-12-2013 includes goods purchased from outside the State of Punjab by the owner of such stock, then such goods will become taxable w.e.f 01.01.2014 as the same would be sold at the first stage of sales.

The further question is whether dealers should bifurcate their stock of such goods into the goods which would be taxable at first stage and which would be tax free, of their own only as no stock declaration to that effect has been asked for.


Whether any reversals are required to be made on the stock as on  31.12.2013-Role of Rule 21(4) of Punjab VAT Rules, 2005: Rule 21(4) of Punjab VAT Rules, 2005 provides that where some goods as input or output are lying in the stock of a taxable person and where such goods become tax free from a particular date, then from that date, no input tax credit shall be admissible to the taxable person on the sale of such goods lying in the stock or on using the goods as input for making such tax free goods.

 Thus the input tax credit if any standing on the stock of such goods which have been made taxable at first stage of sales and on which tax at the first stage has been paid, would have to be reversed and no input tax credit would be available on the sales of such goods w.e.f. 01.01.2014.

There may be some cases where the stock of such goods exists on 31.12.2013 but no corresponding ITC is standing in the books of a dealer, due to the fact that ITC on such stock of goods has been already utilised against other output tax liability by such dealer.

In such case whether such dealer should reverse the Input tax credit on the stock of such goods on which tax has already been paid at first stage of sales, is a question to be asked, because if the input tax credit on such goods have been already utilised, that would mean that tax paid on the previous stages of purchase such goods has been realised by the such owner of the stock.

No Declaration form prescribed for the first stage dealer: The person who has sold the goods at first stage of sales w.e.f 01.01.2014 and paid the tax on it, no declaration form has been prescribed for such person, declaring that the tax has been paid at the first stage of sales.

In the absence of such a form it would be difficult for the third and fourth stage dealers to prove that tax on first stage of sales has been paid and it may also lead to tax evasion.

In nut shell more clarifications are required from the Excise and Taxation Department to address the above issues before implementing the single point of taxation system. 


 
 





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No tax deduction on labour and service part of works contract under Punjab VAT-Commissioner clarifies

0 comments Sunday, December 22, 2013
In an application u/s 85 of Punjab VAT Act, 2005 moved by me on behalf of my client, it has been held by the Excise and Taxation Commissioner, Punjab on 04-12-2013 that Judgement of Punjab & Haryana High Court in CWP 14797 of 2010 Larsen and Toubro vs State of Haryana is binding on all concerned works contractors.  

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Single point of taxation introduced in Punjab VAT.

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 Punjab Government has surprisingly introduced single stage tax system under the Punjab VAT Act, 2005. Punjab Government has notified certain goods, most of which are consumable goods, on which tax under Punjab VAT Act has been levied only at the first stage of its sale.
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New Procedure and form for depositing advance VAT in Punjab

0 comments Wednesday, December 18, 2013



 
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Deployment of ATM machines for banks is not transfer of right to use goods

0 comments Friday, December 13, 2013

This Judgement of Punjab VAT Tribunal has been delivered in one of my cases namely Prizm Payment services Pvt. Ltd. vs State of Punjab Appeal No. 413 of 2013 decided on 15/11/2013
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Shocking amendment in section 66-Analysis of Punjab VAT (Second Amendment) Act, 2013-part 4

0 comments Monday, December 2, 2013
Amendment in section 51- Person incharge included transporters: Section 51 which relates to the road side checking law has been amendmed so as to provide that the person incharge of goods shall also include the carrier of goods or agent of transport company or booking agency or any other bailee for transportation and in-charge or owner of a bonded warehouse or of any other warehouse.
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Analysis of Punjab Value added Tax (Second Amendment) Act, 2013 - part 3

0 comments Sunday, December 1, 2013

In a series of articles on the analsyis of Punjab Value added Tax (Second Amendment) Act, 2013 this is a third article in which the major amendments under Punjab VAT Act, 2005 are discussed herebelow:

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Analysis of the amendments under Punjab VAT(Second Amendment) Act, 2013 - part-2

0 comments Saturday, November 30, 2013
In continuation of my earlier article Analysis of major amendments in Punjab Value Added Tax (Second Amendment) Act, 2013, herebelow the remaining provisions of the said Act are being discussed and analysed.

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Analysis of the major amendments under Punjab VAT (Second Amendment) Act, 2013 - Part-1

0 comments Thursday, November 28, 2013
The Punjab Value Added Tax (Second Amendment) Act, 2013 (Punjab Act No. 38 of 2013) has brought about major and very important changes under the Punjab VAT Act, 2005. All the changes are disucssed and analysed herebelow for the benefit of all blog readers:
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THE PUNJAB VALUE ADDED TAX (SECOND AMENDMENT) ACT, 2013

0 comments Tuesday, November 26, 2013

Notification No. 49-Leg/2013.- Dated 15th November, 2013
The following Act of the Legislature of the State of Punjab received the assent of the Governor of Punjab on the 15th Day of November, 2013, is hereby published for general information:-
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Due date for efiling of VAT return for Qtr2-2013-14 extended to 05.11.2013

0 comments Wednesday, October 30, 2013
PUBLIC NOTICE
 
ATTN:-TAXABLE PERSONS, ADVOCATES, CHARTED ACCOUNTANTS, COST
ACCOUNTANTS.
 
Due to heavy rush on online efiling and on demand by the trading community the
date of efiling of returns for the second quarter i.e. 01.07.2013 to 30.09.2013 is extended
upto 5th of November 2013.
 
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Punjab to have single-stage VAT regime

0 comments Wednesday, October 23, 2013
In a major relief to traders, the Punjab Government has decided to remove the multiplicity in Value Added Tax (VAT) on all commodities by imposing it right at the manufacturing level. The move will not only simplify the taxation procedure, but also eliminate the practice of doing business without proper accounting of sales.

The decision to implement the single-stage taxation regime was taken by the state Cabinet yesterday. It decided to bring a Bill to this effect in the forthcoming session.

Once cleared by the Assembly, the government would ask all major manufacturers selling their goods across the state to charge entire VAT component from the distributor itself. The simplification of tax structure is the main thrust of the new trade policy, which would be announced on November 14.

Of the 2.25 lakh registered VAT dealers in Punjab, only 900 pay more than Rs 1 crore as VAT in a year. A large number of dealers do not pay any VAT, by not accounting sales in their books.
With the new taxation structure in force, Punjab will be amongst the few states to have brought in a single-stage taxation regime. Deputy Chief Minister Sukhbir Singh Badal said the step would go a long way in ensuring that all trade in Punjab was accounted for.

Simplifying things
* The new taxation regime will provide that VAT is imposed right at the manufacturing level

* The manufacturers will pay the entire VAT and then collect it from the remaining people in the supply chain (ie distributors, wholesalers and retailers etc.)

* Besides simplifying the taxation procedure, it will also eliminate the practice of doing business without proper sales accounting

Source: The Tribune
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Public Notice on advance VAT under Punjab VAT Act, 2005

0 comments Monday, October 7, 2013
Excise and Taxation Department has issued a public notice on 06.10.2013 regarding recently levied advance VAT under Punjab VAT Act, 2005. This public notice specify that 100% adjustment of advance VAT is available against tax liability of a taxable person at the time of filing of his return. This public notice tends to suggest the intention of the legislature that no reversals from advance tax will be made in case of inter-state stock transfer or manufacturing of tax free goods or u/s 13(5) where ITC on certain goods is barred.

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Goods on which advance VAT under Punjab VAT Act, 2005, is imposed

0 comments Sunday, October 6, 2013
Punjab Government has notified goods u/s 6(7) of the Punjab VAT Act, 2005 on which Advance VAT will be recovered. Section 6(8) of the Punjab VAT Act, 2005 earlier considered Entry Tax as deemed advance VAT. 
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Entry Tax withdrawn, Advance VAT levied

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Punjab Government has withdrawn the Entry tax under the Punjab Tax on Entry of Goods into Local areas Act, 2000, which was under judicial scrutiny and was cause of continous litigation between the Government and the VAT dealers across the State.


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Procedure for payment of Advance Tax under Punjab VAT Act, 2005

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GOVT. of PUNJAB
Excise and Taxation Department
PUBLIC NOTICE
Dated: 4th October 2013
Attention: All VAT Dealers, Transporters, Chartered Accountants and Advocates

Subject: Payment of Advance Tax
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F form under CST Act can cover transactions of a period more than one month

0 comments Saturday, September 21, 2013
Calcutta High Court in Cipla Limited vs Deputy Commissioner, Commercial Tax reported as VSTI 2013 Vol. 17 B-509 has held that There is nothing in Rule 12(5) of CST (R&T) Rules which could be construed to vitiate a declaration form i.e "F" form on a ground that such declaration form covered transactions for a period of more than a month.
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Extension of time limit for assessment by a public notice on the website is not valid

0 comments Thursday, September 19, 2013
Punjab VAT Tribunal in Olam Agro India Limited vs State of Punjab (2013) 21 STM 128 has held that extension of time limit u/s 29 of Punjab VAT Act, 2005 from 3 years to 6 years, for making assessment of a person, by giving a public notice on the website of the department, is not valid extension.
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Monetary limit for audit under Punjab VAT Act, 2005 raised to one Crore from Fifty lacs

0 comments Tuesday, September 17, 2013
GOVERNMENT OF PUNJAB

DEPARTMENT OF EXCISE AND TAXATION

(EXCISE AND TAXATION-II BRANCH)

NOTIFICATION

The    September, 2013

No. .                                     - 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, 2013.

(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 41, for the words "fifty lacs",the words "one crore" shall be substituted.


D.P.REDDY,
Financial Commissioner Taxation and
Secretary to Government of Punjab,
 Department of Excise and Taxation.
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Processing fee amount revised under Punjab VAT Rules, 2005-certain points

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Punjab Government has revised the amount of processing fee leviable under rule 40-A of the Punjab VAT Rules, 2005. Rule 40-A earlier envisages payment of  annual processing fee of Rs. 800/- by every taxable person under the Punjab VAT Act, 2005.

 Now the different amount of processing fee have been defined for different persons based upon the criteria of payment of taxes by them and their turnover.
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Notification for Extension of date for receipt of ITR-Vs in CPC, Bengaluru, for the cases of AY 2012-13 and 2011-12 received in e-filed in FY 2012-13.

0 comments Sunday, September 15, 2013
There are many taxpayers who have uploaded their Income Tax Returnselectronically (without digital signature Certificate) for A.Y. 2011-12 [filed during F.Y. 2012-13] and for ITRs ofA.Y. 2012-13 [filed on or after1.4.2012], but have either not filed the corresponding ITR-V or have filed it with the local Income-tax office.
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Plywood exempted from E-trip under Punjab VAT act, 2005

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As the news has been coming  that a lump sum tax scheme under Punjab VAT Act, 2005 for plywood industries will be soon notified, the plywood therefore has been exempted from the list of specified goods for the purpose of e-trip.

E-trip is a mechanism whereby one has to report the intra-state i.e within state transactions of specified goods and specified monetary limits only on the website of the Excise and Taxation Department, Punjab.
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Clarifications on E-trip and E-icc

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The Commissioner Excise and Taxation Punjab has issued a clarificaton that "Goods and Materials obtained from cutting of old ships and boats" as well as the :heavy melting scrap" are covered under the entry "irobn and steel" for the purposes of E-trip.

It also has been clarified that only the goods covered in order dated 17-07-2013 relating to e-trip and e-icc are the only goods for e-trip and e-icc needs to be done.
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Overview of E-trip and E-ICC under Punjab VAT Act, 2005

0 comments Monday, September 2, 2013
What is E-Trip and E-ICC:  E-trip and E-ICC has come into force w.e.f 01-08-2013 in Punjab. E-trip is the reporting of intra-state and E-ICC is the reporting of inter-state transactions meant for trade under section 51 of Punjab VAT Act. 2005 on the virtual information collection centre on the official website of the Excise & Taxation Department, Punjab i.e www.pextax.com.

E-trip and E-ICC have been implemented under Rule 64-A, 64-B and 64-C read with Rule 2(hh) of the Punjab VAT Rules, 2005. Although such E-trip and E-ICC system has been implemented w.e.f 01-08-2013 but by public notice dated 01-08-2013(Public notice of 01-08-2013 can be downloaded at the link available at the end of this article) the dealers were allowed time for upgrading their system for the purpose of e-trip till 01-09-2013 and till that time it was assured that no penalty will be levied u/s 51 for not doing E-trip or E-ICC.

Since 01-09-2013 has arrived therefore certain following points relating to E-trip and E-ICC are discussed heerbelow for the all concernds:

When E-Trip is required to be done: E-Trip is required to be done not in all transactions of movement of goods within State but in case of  transactions of specified goods of specified monetary limit only. 

Since E-trip is a reporting of intra-state movement oof goods within State on the virtual information collection centre i.e a compliance u/s 51 of the Punjab VAT Act, 2005 therefore only those transactions of intra-state movement of goods within State is required to be reported under E-trip system, which are meant for business only, as section 51 has applicability only in relation to transactions which are meant for Business.

Thus if an intra-state transaction is meant for personal use and not for business and trade then E-trip of such transaction would not be required.

Specified Goods and monetary limits in which E-trip is required:

Sr.No.
Name of the Specified Goods
Minimum Value
1
Cotton
Rs.50,000
2
Sarson
Rs.50,000
3.
Plywood
Rs.50,000
4.
lron and Steel (excluding Scrap)
Rs.50,000
5.
Yarn
Rs.50,000
6.
Vegetable Oil (edible and non edible)
Rs.50,000


It has been clarified in Public Notice dated 01-08-2013 that “Forging and Casting” items are not included
in the item “Iron & Steel” specified under Rule 64-A and 64-B.

After reporting the transaction under E-trip in form VAT-12-A, an electronic receipt would be generated which mandatorily needs to be carried along with the goods during their movement within State. E-Trip is required to be done before putting the goods in transit within the State.

Any transaction covered by multiple invoices with total value of all invoices exceeding the prescribed threshold, where the consignor & the consignee are the same and the goods are transported through the same vehicle shall be considered a single transaction for the purpose of minimum sale.


Maximum transition time prescribed under Rule 64-A: Rule 64-A(3) of Punjab VAT Rules gives power to Commissioner to specify maximum transition time for delivery of specified goods from one destination to the other destination. The maximum transition time has been prescribed as below:

For distance upto 100 Kms
6 Hours
For distance upto 200 Kms
10 Hour
For distance above 200 Kms
14 Hours

It has been further clarified in Public Notice dated 01-08-2013 that in case goods are being transported through a transporter, the requirements of e-Trip/e-ICC will not be applicable when the goods are being transported from the premises of the dealer to the transporter. In this case, these requirements shall be applicable when the movement of the goods starts from the premises of the transporter.

When E-ICC is required to be done: Reporting of inter-state transaction on the virtual information collection centre by a system of E-ICC is required to be done in two cases i.e in case of export of goods outside the state of Punjab and other is import of goods into the State of Punjab from outside by air, railway or dry port.

E-ICC in case of export of goods outside the State:Rule 64-B deals with the procedure for furnishing information under E-ICC system relating to export of goods outside the State of Punjab by any mode of transition. An owner or person incharge of the specified goods before putting the same into transit for export out of the State, for trade or commerce by any mode of transition has to report the information relating to such export on the virtual ICC in form VAT-12.

The specified goods for the purpose of E-ICC in case of export of goods outside the State are as follows:

Sr.No.
Name of the Specified Goods
Minimum Value
1
lron and Steel
Rs.50,000
2
Hosierv dnd readymade garments
Rs.50,000
3.
Pipes of all kinds i.e. MS Pipe, Gl Pipes, ERW Pipes, Plastic Pipes etc
Rs.50,000
4.
Rice
Rs.50,000
5.
Nut-bolt /Fastener
Rs.50,000

It has been clarified in Public Notice dated 01-08-2013 that “Forging and Casting” items are not included in the item “Iron & Steel” specified under Rule 64-A and 64-B.

Thus E-ICC is applicable only on the goods and monetary limits of a bill specified for this purpose as  mentioned in the above table.In case of other goods or specified goods where bill value is less than the monetary limit of  Rs. 50000/- , there is no need for need for reporting the transaction on E-ICC, rather the same will be recorded at the Information Collection Centre established at the borders of Punjab as and when goods reach such ICC. 

It has also been clarified in public notice dated 01-08-2013 that any transaction covered by multiple invoices with total value of all invoices exceeding the prescribed thresh-hold, where the consignor & the consignee are the same and the goods are transported through the same vehicle shall be considered a single transaction for the purpose of minimum sale.

Maximum transition time for E-ICC: The maximum transition time for delivery of goods from place of departure to the nearest ICC falling enroute towards destination while exiting the State has been specified as under:

For distance upto 100 Kms
6 Hours
For distance upto 200 KMs
10 Hour
For distance above 200 Kms
14 Hours

However it should be noted that it has been clarified in public notice dated 01-08-2013 that for the goods being sent outside the State i.e. goods covered under Rule 64-B, the condition of maximum time limit to leave the State shall not apply.

E-ICC in case of import of goods into State of Punjab: If a person imports any goods into the State of  
Punjab either by air or railways or by dry ports then as per Rule 64-C he needs mandatorily to report the said transaction on the virtual ICC in form VAT-12, before taking the delivery of such goods or before transition of such goods by road, whichever is earlier.

That means import of all goods by railway or air or by dry port will have to be reported on E-ICC and such reporting will have to be done before taking the delivery of such goods or before transition of such goods by road, whichever is earlier.

It should be noted that E-ICC system is applicable on the specified goods and monetary limit in case of Rule 64-B, but in case of Rule 64-C system of E-ICC is applicable on all the goods irrespective of nature of goods or the monetary limit.

username and passwords for E-ICC and E-trip: If a person wants to start reporting on E-ICC, he will have to get username and password for the same from the local jurisdictional officer. After getting the same, one can log on to the website of the Department i.e. www.pextax.com at the links available for E-ICC.

For E-Trip the user name is the TIN of the person and the password which is now working seems to be the old password for the efiling of returns which was used by such person before migrating its TIN on a new system namely COTIS as existing on the new website. 

However it has been clarified by the Department on a public notice dated 01-08-2013 that Transporters will be able to submit data on behalf of the dealers on the website of the department. 
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ITC on capital goods not to be reduced to 4% when tax on the same is paid at 12.5%-Punjab VAT Tribunal

0 comments Friday, August 30, 2013
Punjab VAT Tribunal has held in L.S. Rice Exports Pvt. Ltd. vs State of Punjab (2013) 45 PHT 597 (PVT) that reduction of input tax credit on capital goods from 12.5% to 4% when the purchases made by the assessee are on 12.5% is not sustainable. So the assessee is entitled to full ITC.
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Notice for reassessment u/s 147 can be issued only after time limit for issuing notice u/s 143(2) has expired

0 comments Tuesday, August 20, 2013
Amritsar ITAT has held in DCIT vs Mangat Ram that jurisdiction under section 147 can be acquired only after limitation to issue notice under section 143(2) has expired.

 In this case it has been held by the ITAT that The Assessing Officer cannot acquire two jurisdictions to issue notice under section 148 as well as under section 143(2), especially when there is a time left for issuing notice under section 143(2) with respect to the original return filed by the assessee on 13-3-2008. 

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Statement of Object and reasons behind Etrip in Punjab now disclosed by the Governement

0 comments Sunday, August 18, 2013
Few days back I had written an article namely “Etrip in Punjab-an Uncontrolled delegated legislation” in which I had raised a point that while giving discretionary power to the Commissioner to specify the goods for the purpose of Etrip certain policy should or guidelines should have been laid down according to which the Commissioner has to exercise its power to specify the goods for the purpose of Etrip under Rule 2(hh) read with rule 64-A and rule 64-B  of Punjab VAT Rules, 2005.
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Claim of entry tax deemed as advance tax under Punjab VAT Act not to be conditional

2 comments
Introducton: Entry Tax is a tax levied under the Punjab Tax on Entry of Goods into Local Areas Act, 2000. It is levied u/s 3-A of the said Act on a dealer who is bringing the goods into local areas of Punjab. 

Entry tax can be claimed as input tax credit by a person paying such entry tax against his output tax liability. However such claim of input tax credit of entry tax is available subject to the conditions mentioned u/s 13-A of the Punjab VAT Act, 2005. Section 13-A runs as under

"Subject to the provisions of this Act, a taxable person shall be entitled to input tax credit in respect of the tax, paid by him under the Punjab Tax on Entry of Goods into Local Areas Act, 2000, if such goods are for sale in the State or in the cource of inter-state trade or commerce or in the cource of export or for use in manufacture, processing or packing of taxable goods for sale within the State or in the cource of inter-state trade or commerce or in the cource of export."

Thus claim of entry tax as input tax credit u/s 13-A is available only in the circumstances mentioned above in the section. As per the provisons of section 13-A if a person pays entry tax on raw material to be used in the manufacturing of tax free goods, his claim of entry tax as input tax credit will be restricted.

 However it is notable here that the provisions of section 13-A of the Punjab VAT Act, 2005 are not a complete code in it self as non-abstante clause is missing therein, infact the provisons of section 13-A are subject to the other provisions of the Act.

Position after entry tax deemed as advance tax: A very important change has been brought about the status of entry tax under the Punjab VAT Act, 2005 after the introduction of the provisions contained in sub-section (7) and (8) of section 6 the said Act w.e.f 12-08-2011, which needs to be understood before giving the input tax credit of entry tax paid.

Provisions of section 6(7) and 6(8) runs as under:

(7) Notwithstanding anything contained in sub-section (1) to sub-section (6), the State Government shall charge the tax in advance on the import of goods to be notified in such manner, as may be precribed, and at such rates, as may be notified, but not exceeding the rates applicable on such goods under this Act:

PROVIDED THAT such goods are meant for sale or use in manufacturing or processing of any goods for sale:

PROVIDED FURTHER THAT such tax collected in advance, shall be counted towards final liability of the taxable person at the end of each tax paid.

(8) The tax collected under the Punjab Tax on Entry of Goods into Local Areas Act, 2000(Punjab Act No. 9 of 2000), shall be deemed to have been collected under the provisions of sub-section (7).

A new incidence of taxation (that too with a non-abstante clause i.e irrespective of the taxable quantum of a person) has been created u/s 6(7) which is called as advance tax to be levied on the import of goods. 

Whether such advance tax is within the purview of the Entry 54 of the State List or not wherein State Government can levy tax only on the sale and purchase of goods within the State, remains to be seen. However here in this article only status and claim of entry tax under the current provisions are discussed.

 Such tax in advance is to be charged only on the goods which are meant for sale or use in manufacturing or processing of any goods for sale. Second proviso to section 6(7) further provides that such tax collected in advance shall be counted towards final liability of the taxable person.

No goods have been notified as yet u/s 6(7) on which tax in advance is to be charged, however section 6(8) creates a deeming legal fiction by which entry tax has been considered as tax in advance u/s 6(7).

Entry tax deemed as advance tax to be counted toward final liability: After the introduction of provisions of section 6(7) and 6(8) the status of entry tax is of a tax in advance under the provisions of Punjab VAT Act, 2005. Therefore its adjustment and claim towards the output liability should be allowed as advance tax and not as entry tax, as per the second proviso to sub-section 7 of section 6.

Meaning thereby if a person pays entry tax (now advance tax) on certain goods and uses them in manufacturing of tax free goods then claim of such entry tax(deemed as advance tax) should be allowed as per the IInd proviso to section 6(7). 

Thus a person manufacturing tax free goods having nil final liability is liable to get the refund of entry tax paid by him as such entry tax paid(deemed advance tax) has to be counted towards final liability of the taxable person.

The question may be raised that provisions of section 13-A will restrict input tax credit of entry tax paid in the above mentioned case, but it should be noted that provisions of section 13-A starts with words "Subject to other provisions of this Act", therefore section 13-A is bound by the provisions of section 6(7) and 6(8) of Punjab VAT Act, 2005.Hence credit of entry tax deemed as advance tax is no more conditional one as per the provisons of section 13-A.




 







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