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.
Insertion of section 8-D-Power to grant tax
incentives: A new section 8-D has
been introduced under Punjab VAT Act so as to give power to the State
Government under a non-abstante clause, to grant tax incentives to the
industries which come into production for the first time as and when notified
in the industrial policy framed by the Department of Industries.
It seems that Government is soon going to frame a
new Industrial Policy after the industrial policy of 1996 so as to grant the
tax incentives to the new industries, for which purpose the above amendment has
been made.
Insertion of section 8-E-Retention of tax
collected: Section 8-E has
also been introduced which gives power to the State Government to allow
retention of tax collected to such class of industries subject to such
conditions as may be prescribed.
Amendments u/s 13 relating to input tax credit: Section 13 which is a very important
section under Punjab VAT Act, 2005 relating to the input tax crediit has also
been amended.
First proviso to section 13 has been substituted
as follows:
"Provided that the input tax shall not be available as input tax Credit unless such goods are sold within the State or in the course of inter-State trade or commerce or in the course of export or are used in the manufacture, processing or packing of taxable goods for sale within the State or in the course of inter-State trade or commerce or in the course of export."
The amended proviso has been differently worded
from the earlier proviso. In the amended proviso the words used are "unless such goods are sold" where as in the proviso before amendment the words used were "such goods are for sale".
Does that mean input tax credit will be available only if the goods are sold? If the goods remain unsold at the end of the tax period then what will be the effect of amended first proviso?
Does that mean input tax credit will be available only if the goods are sold? If the goods remain unsold at the end of the tax period then what will be the effect of amended first proviso?
The above amendment in section 13(1) shall come
into force w.e.f 01.04.2014.
Advance VAT not to be treated as input tax
credit: Section 13(1-A) has been
omitted w.e.f 04.10.2013. Section 13(1-A) provided for treatment of Advance VAT
as input tax credit. Since Advance VAT has to be counted towards final tax
liability as per section 6(7) and final liability is calculated after
adjustment of output tax with input tax credit, therefore ommission of section
13(1-A) was neccessary in view of section 6(7).
The effect of this amendment will be that advance
VAT will not be subject to reversals as input tax credit.
Reversal of input tax credit as the time of
closure of business: Sub-section 9 of
sectuon 13 has also been amended so as to provide that a person shall reverse
input tax credit availed by him on goods which remained in stock at the time of
closure of business.
Before amendment section 13(9) also
provided a condition that input tax credit shall be reversed on the goods if
they are not used for the purposes as mentioned in section 13(1). Now the said
condition has been removed in view of the amendment in first proviso to section
13(1).
Input tax credit not to exceed tax paid in the
Government Treasury-attempt to negate the judgement in Gheru Lal Bal Chand
case?: Section
13(12) has been amended so as to additionaly provide that the input tax credit
shall be utilized in accordance with the conditions mentioned in this section,
but in no case the amount of input tax credit on any purchase of goods shall
exceed the amount of tax, in respect of the same goods or goods used in
manufacture of same goods, actually paid, if any, under this Act, into the
Government Treasury.
This is a very important amendment. The Punjab
& Haryana High Court in Gheru Lal Bal Chand vs State of Haryana had held
that selling dealer while collecting the tax is an agent of the Government and
unless the collusion is proved between selling and the purchasing dealer or its
predeceasors, purchasing dealer cannot be disallowed input tax credit for the
reason that selling dealer has not paid the tax into the Government Treasury.
Now in the above amendment the claim of input tax
credit has been restricted only to the extent of tax actually paid in the
Government Traesury.
Now, does it mean the purchasing dealer
shall be allowed input tax credit only to the extent of the tax actually paid
in the Government Treasury by the selling dealer?
If the selling dealer makes default in the
payment of tax collected by him then corresponding input tax credit of
purchasing dealer shall fall short of the tax actually paid by the selling
dealer, wherefore the input tax credit of the purchasing dealer will be
disallowed to the extent of tax not paid by the selling dealer.
By this amendment has the Government tried to
overcome the difficulties faced by the revenue after the Judgement of Punjab
& Haryana High Court in Gheru Lal Bal Chand case?
Will this amendment work for the revenue in
disallowing the input tax credit for non payment of tax by selling dealer
despite the verdict in Gheru Lal Bal Chand case, remains to be seen.
to be continued....
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