Cammon Inputs

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ramesh vadnala

ramesh vadnala (Querist)
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30 November 2007 Please explain me cammon inputs to claim input credit under apvat

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)
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10 December 2007 I think the following leaflet may help[ you:-
Leaflet 04-C
WHAT CAN I CLAIM AS A CREDIT OF INPUT TAX
IF I AM MAKING SALE OF EXEMPT GOODS
This leaflet is meant for VAT dealers who make sale of exempt goods in addition to
taxable sales. If you are one such VAT dealer, you should read this leaflet in addition to the
leaflet 04 –A.
1. WHAT IS THE AMOUNT OF INPUT TAX CREDIT THAT CAN BE
CLAIMED BY ME IF I AM BUYING AND SELLING GOODS IN THE SAME
FORM AND USE FEW COMMON INPUTS LIKE PACKING MATERIAL
FOR SALES OF TAXABLE AND EXEMPT GOODS?
If you are buying and selling the goods in the same form, you can claim full input tax
credit in respect of all taxable goods purchased in every tax period. The adjustment for
the input tax credit pertaining to common inputs can be made in the year-end in the
return for March.
2. AM I REQUIRED TO MAKE ANY DECLARATIONS OR FILE
ADDITIONAL ENCLOSURES ALONG WITH THE TAX RETURN AND
HOW DO I MAKE ANNUAL ADJUSTMENT FOR THE COMMON
INPUTS?
You are required to make a declaration in the Form VAT 200 D for every tax period
along with tax return giving the break up of your turnovers and input taxes. For the
common inputs, you shall repay input tax related to exempt element of common inputs
after making adjustment in the tax return for March by filing Form VAT 200B for the
period of twelve months ending March. In the Form VAT 200B, the eligible input tax
credit shall be calculated by applying formula
A x B .
C
Where ———
A is the total amount of input tax for common inputs for each tax rate excluding the tax
paid on negative list goods.
B is the sales turnover of taxable goods including zero-rated sales
C is the “total turnover” including sales of exempt goods.
3. WHAT IS THE AMOUNT OF INPUT TAX CREDIT THAT CAN BE
CLAIMED BY ME IF EXEMPT SALES ARE NEGLIGIBLE?
Where the value of taxable sales is 95% or more of the total value for that tax period,
you can claim credit for the full amount of input tax paid on purchases excluding the tax
paid on purchase of goods mentioned in negative list. You are not required to file any
declaration every month but you should make annual adjustment by filing Form VAT
200 B in the month of March by following the calculation mentioned in answer to
Question No.2.
4. WHAT IS THE AMOUNT OF INPUT TAX CREDIT THAT CAN BE
CLAIMED BY ME IF TAXABLE SALES ARE NEGLIGIBLE?
Where the value of sales of exempt goods is 95% or more of the total value for that tax
period, you cannot claim credit for any input tax paid on purchases. You are not required
to file any declaration every month but you should make annual adjustment by filing
Form VAT 200 B in the month of March by following the calculation mentioned in
answer to Question No.2.
5. HOW DO I CALCULATE THE AMOUNT OF INPUT TAX WHICH I CAN
CLAIM AS A CREDIT IF I AM A MANUFACTURER AND MAKE SALE
OF TAXABLE GOODS AND SALE OF EXEMPT GOODS BY USING
COMMON INPUTS?
If you are a manufacturer and use common inputs for making taxable sales and exempt
sales in a tax period, the amount, which can be claimed as input tax credit for the
purchases of the goods at each tax rate shall be calculated by the formula
A x B .
C
Where ———
A is the amount of input tax relating to common inputs for each tax rate for the tax
period; excluding the tax paid on negative list goods.
B is the value of taxable sales for the tax period and which shall include value of
international exports and value of inter-state sales of taxable goods – B is sum total of
Boxes 13 A, 14 A, 16 A, 17 A and 19 A on your VAT return.
C is the total sale turnover which includes exempt sales – C is sum total of Boxes 12 A,
13 A, 14 A, 16 A, 17 A and 19 A on your VAT return.
The result of this calculation is the amount of input tax that can be claimed in Box (7B)
and (8B) of your VAT return for the tax rates of 4% and 12.5% respectively. The
values related to the tax claimed must be entered in Box (7A) and, (8A) of the VAT
return respectively and the balance of the value including the unclaimed input tax entered
in box (6A) of the VAT return.
You are required to file an annexure to monthly tax return in Form VAT 200 A. In
addition to the monthly annexure, you are required to make an annual adjustment in
Form VAT 200B. The excess input credit claimed shall be paid back or the balance
input credit eligible can be claimed in the tax return for March.
6. CAN I ADOPT A DIFFERENT METHOD TO CALCULATE INPUT TAX
CREDIT?
If you are able to establish that specific inputs which are meant for specific output, then
you can adopt the following method to arrive at eligible input tax credit every tax period:
1. You can take credit for the full amount of input tax paid on inputs used separately
for taxable goods. You need to keep with you evidence in the form of stock
registers or other accounts for establishing the above.
2. For the common inputs, you can claim input tax credit by applying the formula Ax
B/C for the common inputs used for taxable sale and exempt sales.
3. You are required to file an annexure to monthly return in Form VAT 200A every
tax period. In addition to the monthly annexure, you are required to make an
annual adjustment in Form VAT 200B. The excess input credit claimed shall be
paid back or the balance input tax credit eligible can be claimed in the tax return
for March.
4. Please note that once you adopt a particular method to calculate input tax credit,
you need to be under that method upto the end of March. However, in case you
wish to change the method of calculating input tax credit, you must intimate such
option to your jurisdictional authority.
Illustrations: (indicating calculation of eligible Input Tax Credit in different circumstances)
1. Resellers of taxable goods and exempt goods
(VAT dealers following sub rule 4 of Rule 20)
SMT, a Super Bazaar, Registered for VAT is dealing in taxable goods (Soaps, Cosmetics,
Food grains etc) and exempt goods (Sugar, milk, vegetables etc). SMT buys and sells these
goods in the same form every month and also purchases packing material and other goods
required for its business. For a tax period, SMT can claim input tax credit as under:
PURCHASES ( INPUT) SALES ( OUTPUT)
RATE OF TAX TURNOVER VAT PAID TURNOVER VAT PAYABLE
4% Goods 1,00,000 4,000 1,20,000 4,800
12.5% Goods 1,00,000 12,500 80,000 10,000
Exempt goods 50,000 NIL 40,000 NIL
4% goods like 10,000 400 NIL NIL
packing material
used as common
inputs for both
taxable & exempt
goods
12.5% goods 20,000 2,500 NIL NIL
used in business
common for
both taxable
and exempt
goods
TOTAL 19,400 TOTAL 14,800
INPUT TAX OUTPUT TAX
Since SMT is buying and selling the goods (taxable goods and exempt goods) in the same
form, the input tax paid on common inputs can be fully claimed in that tax period.
VAT payable/Credit carried over = Output tax – Input tax
= Rs.14,800 – Rs.19,400
= (+) Rs.4,600 Credit carried over to next month.
Since SMT has availed full input tax credit on common inputs in the monthly returns:
(i) the VAT dealer should make declaration in the Form VAT 200D for each tax period
indicating the details of sales of taxable goods and exempt goods and also details of
common input tax and input tax paid on taxable goods meant for sale and input tax
claimed in the monthly return. No adjustments need to be made for every tax period.
(ii) the dealer is required to submit a return in Form 200B to repay input tax related to
exempt element of common inputs after making adjustment of input tax credit for the
period of twelve months ending March for each tax rate.
At the end of March, the turnovers relating to last 12 months are as under: (Adjustments to be
made in Form VAT 200B)
1. Total taxable turnover for 12 months : Rs.50.00 Lakhs-B
2. Total sales of exempt goods for 12 months : Rs.10.00 Lakhs
3. Total turnover for 12 months : Rs.60.00 Lakhs-C
(Sl.No.1+Sl.No.12)
4. Input tax paid on common inputs &
claimed for 12 months on 4% goods : Rs.4,800 -A for 4%
5. Input tax paid on common inputs &
claimed for 12 months on 12.5% goods : Rs.30,000-A for 12.5%
SL. DESCRIPTION 4% RATE OF GOODS 12.5% RATE GOODS
No.
1. Apply calculation A x B/C A x B/C
4800x50 lakhs 30000x50 lakhs
60 lakhs 60 lakhs
2. Eligible input tax credit 4,000 25,000
3. Input tax credit 4,800 30,000
claimed in returns
4. Balance payable 800 5,000
5. Adjustment Pay this amount by Pay this amount by
including in 4% including in 12.5%
output box (16B) in output box (17B) in
Form VAT 200 for Form VAT 200
March for March
2. Taxable goods & sales of exempt goods lesser values Manufacturers or Resellers
(VAT dealer following sub rule 5 of Rule 20)
RMR, a rice miller, registered for VAT is engaged in converting Paddy into rice and selling the
same along with other byproducts. RMR is not having any consignment sales or branch
transfers. For a tax period, RMR can claim input tax credit as under:
PURCHASES ( INPUT) SALES ( OUTPUT)
RATE OF TAX TURNOVER VAT PAID TURNOVER VAT PAYABLE
4% Goods 1,00,000 4,000 1,50,000 6,000
(Paddy from other (Rice, broken
traders & gunnies) rice, bran)
12.5% Goods 10,000 1,250 NIL NIL
(Machinery items)
Exempt goods NIL NIL 1,000 NIL
(Paddy husk)
TOTAL TOTAL 6,000
INPUT TAX 5,250 OUTPUT TAX
VAT payable = Output tax – Input tax
= Rs.6,000 – Rs.5,250
= Rs.750
Since the value of taxable goods is more than 95% of the total sale value, RMR can claim full
amount of input tax credit. However, if the value of taxable sales is less than 5% of the total
sale value, the VAT dealer should not claim input tax credit for that tax period.
Further, RMR is required to make an adjustment of input tax credit for each tax rate in the
month of March for the 12 month period ending March on Form VAT 200B.
At the end of March, the turnovers relating to last 12 months are illustrated below:
(Adjustments to be made on Form VAT 200B)
1. Total taxable turnover for 12 months : Rs.80.00 lakhs -B
2. Total sales of exempt goods for 12 months : Rs.50,000
3. Total turnover for 12 months : Rs.80.50 lakhs -C
4. Input tax paid & claimed for
12 months on 4% rate goods : Rs. 48,000 -A for 4%
5. Input tax paid & claimed for
12 months on 12.5% rate goods : Rs. 15,000-A for 12.5% goods
Sl. Description 4% rate of goods 12.5% rate of goods
No
1. Apply A x B/C A x B/C
calculation 48000x80 lakhs 15000x80 lakhs
80.50 lakhs 80.50 lakhs
2. Eligible input
tax credit 47,700 14,907
3. Input tax credit
claimed in
returns 48,000 15,000
4. Balance payable 300 93
5. Adjustment Pay this amount by Pay this amount by including
including in 4% in 12.5% output box (17B) in
output box (16B) in Form VAT 200 for March
Form VAT 200 for
March
3. Manufacturing & selling taxable goods and exempt goods
(VAT dealer following sub rule 7 of Rule 20)
TEC, a dairy plant is registered for VAT and engaged in production and sales of both taxable
goods and exempt goods. The procedure for claiming input tax credit for a month is shown
below:
VAT payable = Output tax – Input tax (eligible)
To arrive eligible input tax credit, the VAT dealer should make calculation A x B/
C in Form VAT 200A for the tax period for each tax rate.
PURCHASES ( INPUT) SALES ( OUTPUT)
Rate of Goods Turnover VAT paid Turnover VAT
Tax Payable
4% Common 2,00,000 8,000 1,00,000 4,000
for taxable
and exempt
goods
12.5% Common 60,000 7,500 NIL NIL
for both
taxable
and exempt
goods
NIL Exempt 5,00,000 NIL 7,00,000 NIL
goods
TOTAL TOTAL
INPUT TAX 15,500 OUTPUT TAX 4,000
A = Input tax paid for each tax rate
B = Taxable turnover
C = Total turnover (Taxable turnover + turnover of sales
of exempt goods)
VAT payable in the tax period : Rs.4000 – Rs.1938
: Rs.2062
NOTE: 1) TEC should submit Form VAT 200A every month, making
adjustment of input tax credit to arrive and claim eligible input tax
credit for that tax period.
2) Further, TEC should also carry out adjustment of input tax credit
for each tax rate for a period of twelve months ending March and
submit such details in Form VAT 200B
3) Such adjustment shall be made as below:
a) Any excess claimed in the monthly VAT returns shall be paid
back in the return for March by adding it to the appropriate box
in the output column for each tax rate.
b) Any balance credit eligible in the monthly returns shall be claimed
in the return for March by adding it to the appropriate box in the
input column for each tax rate.
Sl. Description 4% rate of 12.5% rate Total
No. goods goods eligible
1. Input tax paid 8000 7500 NIL
in the tax period
2. Apply 8000x 100000 7500x100000 NIL
calculation 800000 800000
3. Eligible 1000 938 1938
input tax

Source:-
www.apcommercialtaxes.gov.in/allacts/vat/leaflets_eng/LEAF-4C.pdf -