Sunday, May 13, 2012

Refund of VAT (Value Added Tax)

Refund of Vat
       Credit of tax paid in inputs/Capital goods is available to the utilised against tax liability which will be calculated on the sale of final product.   Vat credit can not be availed if no tax is payable on final product being exempt or taxable at lower rate.  Similar situation will arise in the case of exporters also.   Hence a mechanism is needed for the early refund of tax paid on input/capital goods in the case of dealer/manufacturer of exempted goods or exporters.  similarly refunds will also arise on sales made to diplomats/diplomatic missions and to other organisations who are exempted from the levy of sales tax.

Non-Availability of input credit in certain cases. 
          In the following cases credit of Tax paid on inputs shall not be allowed:

  1. Where final product is exempt- Credit of tax paid on inputs is available only if tax is paid on final products.  When final product is exempt from tax, credit will not be allowed.  If credit was availed, it will have to be reversed on pro-rata basis.
  2. No Credit if input lost/damaged/stolen before use- Where the inputs have been lost or damaged or stolen before these have been used, credit of tax paid on such input shall not be allowed.  If credit was availed, it will have to be reversed. 
  3. No credit on certain purchases- Generally, in following cases, credit is not availale-
    (a) Purchase of automobiles.
    (b) Fuel. However, some states are allowing input credit for the same. 

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