I would like to draw your attention on the sub-section (3) of section 14 of the Assam VAT Act, 2003. I think you will get the tailoremade answer of your querry in that section.
I am provioding here the section 14 for your ready reference:-
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 inter-state 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 sub-section (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:—
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.
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