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Niketa

Niketa (Querist)
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22 May 2014 Can we take input tax credit on purchase made from GRN dealer???

Yogesh Shukla

Yogesh Shukla (Expert)
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22 May 2014 Yes you can take

Section - 14 Input tax credit.-

(1) Subject to the other provisions of this section, any registered dealer who
makes purchases from another registered dealer of taxable goods other than
the goods specified in the Fourth Schedule within the State, shall be eligible for
input tax credit.
(2) The dealer availing of the input tax credit shall maintain the register and the
books of accounts in the manner as may be prescribed.
(3) The input tax credit shall be allowed to the extent of the amount of tax paid
by the purchasing dealer on his purchase of taxable goods other than the goods
specified in the Fourth Schedule, made in the State, from a registered dealer
holding a valid certificate of registration, which are intended for the purpose of,—
(a) sale or re-sale by him in the State; or
(b) sale in the course of inter-state trade or commerce; or
(c) sale in the course of export out of the territory of India; or
(d) use as raw material or as capital goods in the manufacture and processing of
taxable goods other than the goods specified in the Fourth Schedule, intended
for sale of the nature referred to in clauses (a), (b) and (c); or
(e) use as containers or materials for packing of taxable goods other than the
goods specified in the Fourth Schedule, intended for sale of the nature referred
to in clauses (a), (b) and (c):

Provided that if purchases are used partially for the purposes specified in this
sub-section, the input tax credit shall be allowed proportionate to the extent
they are used for the purposes specified in this sub-section.
(4) The input tax credit shall not be claimed by the dealer until the tax period in
which he receives from a registered dealer from whom he has purchased the
goods, a tax invoice in the prescribed form (in original) evidencing the amount of
input tax, expires:
Provided that for good and sufficient reasons to be recorded in writing and in the
prescribed manner the Commissioner may allow such credit subject to such
conditions and restrictions as may be specified.
(5) Input tax credit on capital goods as admissible under this section shall
commence from the date of commencement of commercial production and shall
be adjusted against tax payable on output over a period of three years in thirty
six equal installments:
Provided that in case of closure of business before the period specified above,
no further input tax credit shall be allowed and input tax credit carried forward, if
any, shall be forfeited.
Comments:
Following amendments were made in sub-section (5) by the Assam Value Added
Tax (Second Amendment) Act, 2005 (Assam Act No. XXXVI of 2005) brought in to
force from 28.11.2005 vide Government Notification No. FTX.128/2005/2 dated
28th November, 2005.

a) the words “in thirty six equal installments” has been inserted in between the
words “period of three years” and the punctuation mark “:”
b) In the first proviso, the punctuation mark “.” has been substituted in place of
punctuation mark “:”.
c) Second proviso has been omitted.
Prior to the above said amendments, it read as under
“Input tax credit on capital goods as admissible under this section shall
commence from the date of commencement of commercial production and shall
be adjusted against tax payable on output over a period of three years:
Provided that in case of closure of business before the period specified above,
no further input tax credit shall be allowed and input tax credit carried forward, if
any, shall be forfeited:
Provided further that no person shall be entitled to input tax credit on capital
goods if such person is the second or subsequent purchaser of such capital
goods.”

(6) No input tax credit shall be claimed by a registered dealer or shall be allowed
to him for,—
(a) tax paid on the purchases of goods used in the exploration, extraction,
manufacture, processing or packing of goods specified in the First and the Fourth
Schedule;
Provided that an Oil Refinery shall not be eligible for input tax credit on the
purchase of any goods including crude oil used in the refining, manufacturing,
processing or packing of any petroleum products specified in the Fourth Schedule
or in any other Schedule;

Comment:-
[Clause (a) has been substituted by Assam Act No. XIII of 2005 brought in to
force from 01.05.2005 vide Government Notification No. FTX.55/2005/2 dated
28th April, 2005. Prior to the substitution, it read as under
“(a) tax paid on the purchases of goods used in the manufacture or processing
or packing of goods specified in the First and the Fourth Schedule;”

(b) purchases made in the course of interstate trade and commerce or in the
course of import from outside the country or from outside the State in respect of
tax paid in the other country or other state;
(c) purchases of goods made in the State from an unregistered dealer or from a
dealer provisionally registered or from a dealer whose certificate of registration
has been suspended or from a registered dealer who has given an option to pay
lump sum amount in lieu of tax by way of composition or for purchases of goods
made in the State by a dealer opting for such lump sum tax;
(d) purchases of goods used as free samples or gift, or for personal
consumption, and if a dealer has already taken any input tax credit against
purchases of such goods there shall be a reverse tax credit at the end of the
month in which such goods are used as such;
(e) goods purchased for the use specified under sub-section (3) but not sold
because of any theft, loss or destruction or any reason including natural calamity
and if a dealer has already taken any input tax credit against purchases of such
goods there shall be a reverse tax credit at the end of the month in which such
goods are stolen, lost or destroyed;
(f) purchases of capital goods specified in Seventh Schedule;
Comment:-
[Clause (f) has been substituted by Assam Act No. XIII of 2005 brought in to
force from 01.05.2005 vide Government Notification No. FTX.55/2005/2 dated
28th April, 2005. Prior to the substitution, it read as under
“(f) purchases of capital goods other than those directly and exclusively used for
manufacturing or processing of taxable goods or packing of such goods or in the
furtherance of business as mentioned in sub-section (8) of section 2;”
(g) stock of goods remaining unsold at the time of closure of business and if a
dealer has already taken any input tax credit against purchases of such stock of
goods, there shall be a reverse tax credit on the date of stoppage or closure of
such business;
(h) tax paid on purchases of goods despatched to a place outside the State not as a direct result of sale in the course of inter-state trade:
Provided that the input tax credit may be allowed for the tax paid in excess of
the amount of tax that would have been leviable had the goods been sold in the
course of inter-state trade or commerce to a registered dealer;
(i) tax paid on purchases of goods used as raw material for manufacture of
goods despatched outside the State otherwise than by way of sale:
Provided that input tax credit shall be allowed for the tax paid on the raw
materials in excess of the tax that would have been leviable had such raw
material been sold in the course of inter-state trade or commerce to a registered
dealer;
Comment:-
[Proviso has been substituted by Assam Act No. XIII of 2005 brought in to force
from 01.05.2005 vide Government Notification No. FTX.55/2005/2 dated 28th
April, 2005. Prior to the substitution, it read as under
“Provided that the input tax credit may be allowed for the tax paid on the raw
materials in excess of the amount of tax that would have been leviable had the
finished goods made from such raw materials been sold in the course of interstate
trade or commerce to a registered dealer;”
(j) tax paid on purchases of goods specified in the Fourth Schedule;
(k) purchases of goods which are used as fuel in generation of energy;
(l) purchases where,—
(i) tax invoice is not available with the dealer; or
(ii) there is evidence that the same has not been issued by the selling dealer
from whom the goods are purported to have been purchased; or
(iii) the original invoice does not contain the details of tax charged separately by
the selling dealer from whom the purchasing dealer has purchased the goods;
(m) automobiles of any type including commercial vehicles, two and three
wheelers, and spare parts for repair and maintenance thereof, unless, the
dealer is in the business of dealing in such automobiles or spare parts;
(n) food, beverages and tobacco products, unless the dealer is in the business of
providing food, beverages and tobacco products;
(o) air-conditioning units unless the dealer is in the business of dealing in such
units;
(p) goods purchased and accounted for in business but utilised for the purpose
of providing facility to the employees including any residential accommodation;
and
(q) purchases of goods, if the tax payable to the Government by the purchaser
himself in respect of purchase of such goods has not been paid.
(7) The Government may, by notification in the Official Gazette, specify any goods
in respect of which input tax credit shall not be allowed in part or in full or specify
the class of dealers who shall not be entitled to input tax credit in part or in full.
(8) If the goods purchased were intended for the purposes specified under subsection
(3) and are subsequently used fully or partly for purposes other than
those specified under the said sub-section or are used fully or partly in the
circumstances described in subsection (6), the input tax credit, if availed of, shall
be reduced on account of such use, from the tax credit being claimed for the tax
period during which such use has taken place; and such reduction shall be done
in the manner as may be prescribed.
(9) Without prejudice to the generality of the provisions of subsection (8), input
tax credit already availed of shall stand reversed in the following circumstances,
—

(a) if the dealer discontinues his business and he holds the stock of taxable
goods at the time of such discontinuance; or
(b) if the registration certificate granted to a dealer is cancelled and at the time
of such cancellation, he holds the stock of taxable goods; or
(c) if the purchased goods or the goods manufactured out of the goods
purchased or the packing materials are stolen or destroyed or lost or disposed of
or dispossessed of otherwise than in the course of business; or
(d) where excess input tax credit has been claimed; or
(e) if the purchased goods are returned to the selling dealer; or
(f) if the goods purchased inside the State are despatched to a place outside the
State not as a direct result of sale in the course of inter-state trade; but it shall
be subject to the provisions of clause (h) of sub-section (6); or
(g) if the credit note has been received from the selling dealer for the amount of
tax charged in excess of the tax due according to the provisions of this Act.
Comments:
Following amendments in clause (g) of sub-section (9) were made by the Assam
Value Added Tax (Second Amendment) Act, 2005 (Assam Act No. XXXVI of 2005)
brought in to force from 28.11.2005 vide Government Notification No.
FTX.128/2005/2 dated 28th November, 2005.
a) The punctuation mark “.” has been substituted in place of punctuation mark
“,” occurring at the end.
b) The last paragraph beginning with the words “The dealer shall be” has been
omitted.
Prior to the above said amendments, it read as under
(g) “if the credit note has been received from the selling dealer for the amount of
tax charged in excess of the tax due according to the provisions of this Act,
The dealer shall be liable to pay such amount of reverse input tax credit along
with simple interest of one and half percent per month from the date immediately
succeeding the last date prescribed for filing of return of such period for which
such input tax credit was claimed till the date of its payment.”
(10) Where any purchaser, being a registered dealer, has been issued with a
credit note or debit note or if he returns or rejects goods purchased, as a
consequence of which the input tax credit availed of by him in any period in
respect of which the purchase of goods relates, becomes either short or excess,
he shall compensate such shortfall or excess by adjusting the amount of tax
credit allowed to him in respect of the tax period in which the credit note or debit
note has been issued or goods are returned, subject to such conditions as may
be prescribed.
(11) A registered dealer may avail of the amount of net tax credit, which shall be
determined in the following manner, namely:—

determined in the following manner, namely:—
Net Tax Credit = A+ B – C
Where,—
"A" represents the amount of input tax credit the dealer is entitled to,
"B" represents outstanding credit brought forward from the previous tax period,
and
"C" represents reverse input tax credit as determined under sub-section (8) or
sub-section (9).
(12) The methods that are used by a registered dealer in a year to determine
the extent to which the goods are sold, used, consumed or supplied, or intended
to be sold, used, consumed or supplied in the course of making taxable sales
shall be fair and reasonable:
Provided that the Commissioner may, after giving the dealer a reasonable
opportunity of being heard and for the reasons to be recorded in writing, reject
the method adopted by the dealer and calculate the amount of tax credit.
(13) Where a registered dealer without entering into a transaction of sale,
issues to another registered dealer tax invoice, retail invoice, bill or cash
memorandum with the intention of defrauding the Government of its revenue or
with the intention that the Government may be defrauded of its revenue, the
Commissioner may, after making such inquiry as he thinks fit and after giving the
dealer a reasonable opportunity of being heard, deny the benefit of input tax
credit to such registered dealers issuing or accepting such tax invoice, retail
invoice, bill or cash memorandum either prospectively or retrospectively from
such date as the Commissioner may, having regard to the circumstances of the
case, fix.

Niketa

Niketa (Querist)
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22 May 2014 THANX FOR THE RESPONSE..

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