Input Credit under MVAT on Coal used as Fuel for a Mfg Co

This query is : Resolved

ibrahim (Querist)
Follow

17 January 2011 I just want to know whether vat input credit can be taken on Coal purchased as fuel for a manufacturing company.

On purchase invoices vat shown by the party.

Thanks in advance.

CA Umesh Sharma

CA Umesh Sharma

(Expert)
Follow

18 January 2011 Dear,
As per rule 53(1) retention of 3% is there on fuel used in manufacturing. On remaining amount you can take set-off.

Message likes : 1 times

ibrahim

ibrahim (Querist)
Follow

19 January 2011 Dear Umesh,

That is why i am confused.
My client while accounting the same has shown vat input @ 4%.
But at the end of the month they reverse the same to Purchase.
They file monthly VAT returns & in it do not include vat input credit on coal.

E.g Total vat input for the month is Rs.50000

Vat input credit on Coal is Rs.30000

They show input credit for set-off Rs.20000 only

On asking they told that the sales tax officer does not allow coal set-off.

Please help me out with this. (Is there any circular/notification or any sort of supporting for the same...???)

Upgrade to CAclubindia Pro. Subscribe Now!

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

01 August 2024 Under the Maharashtra Value Added Tax (MVAT) Act, the treatment of VAT input credit on coal used as fuel can indeed be complex. Generally, input tax credit (ITC) is available on purchases used in the course of business, but there can be specific exclusions or conditions based on the nature of the inputs and their usage.

### General Provision on Input Tax Credit:

Under the MVAT Act, ITC is generally allowed on the purchase of goods that are used for the manufacture of taxable goods or for resale. However, there are specific provisions and exceptions related to certain inputs, such as fuel.

### Specific Provision for Coal as Fuel:

1. **Section 48 of the MVAT Act:** This section allows a registered dealer to claim input tax credit on purchases made for the purpose of manufacturing taxable goods within the state. However, there are exceptions where ITC is restricted or disallowed.

2. **Rule 53 of the MVAT Rules:** This rule lists the goods and circumstances under which input tax credit is disallowed or restricted. Specifically, Rule 53(6) disallows ITC on purchases of "fuel" used in the manufacture of goods, which include coal.

3. **Circulars and Notifications:** There may be specific circulars or notifications issued by the Maharashtra VAT Department that clarify the treatment of input tax credit on coal used as fuel. These can provide further details and should be consulted for the most current regulations.

### Practical Scenario:

In your client's case, it appears that the Sales Tax Officer has disallowed the ITC on coal used as fuel, which aligns with the provisions of Rule 53(6) of the MVAT Rules. This is why your client reverses the input credit on coal at the end of the month and does not include it in the VAT return.

### References:

1. **MVAT Act and Rules:** Refer to Section 48 of the MVAT Act and Rule 53(6) of the MVAT Rules for detailed provisions on input tax credit.

2. **Sales Tax Department Circulars:** Check for any circulars or notifications from the Maharashtra Sales Tax Department that specifically address the treatment of input tax credit on coal used as fuel.

### Conclusion:

Based on the provisions of Rule 53(6) of the MVAT Rules, it is correct that input tax credit on coal used as fuel is not allowed. Therefore, your client's practice of reversing the VAT input credit on coal aligns with the regulatory requirements.

For further clarification or if there have been any recent changes, you can consult the latest circulars or notifications from the Maharashtra Sales Tax Department or seek professional advice from a tax consultant.