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Reversal of input tax credit

Sara11 (Student) (53 Points)

13 February 2015

There is this client selling readymade garments.. He gets his order on facebook.. Many of his customers would be from other states.. He is purchasing within the state and selling it interstate.. He is charging his customers 5% CST.. So far, we have been claiming ITC for the above transaction.. Now as I came to know that under section 19(5)(C) of TNVAT act 2006, no ITC is allowed for the said transaction.. So is he at loss whenever he makes a CST sale to customers..?? Is'nt there any other way of avoiding this.?

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(Guest)

Yes, he cannot claim the ITC. But he can get the refund of ITC at the end of the year.

One more thing :

He should tie up with the supplier in such a way that the bill will be issued by the supplier.

Your client will provide service of an agent. Your client will pay service tax on commission.

Here, your client will get 10 lacs Small Scale Service provider exemption.

Also, he will get the benefit of set off of ITC, once GST comes.

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Shalini (none) (105 Points)
Replied 14 February 2015

No he cannot get refund.. Since he charging 5% CST it means it is sale without c form and the entire input credit on purchases corresponding to such sales should be reversed.. It is disallowed.

Shalini (none) (105 Points)
Replied 14 February 2015

If you notice the supplier is also within state.. Why will he agree to raise the invoice for sale outside the state which will attract disallowance when he can sell it locally to the client for vat and claim input credit??

Arif Ali (Apt Co Advisory) (1230 Points)
Replied 14 February 2015

totally agree with Rashid.

Sunil Nahar (Business) (29 Points)
Replied 19 February 2015

I have come across news that the entire ITC is forfeited if goods get sold outside the state. We can not get the refund for the unused ITC. Is this true?

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Sunil Nahar (Business) (29 Points)
Replied 19 February 2015

I have come across news that the entire ITC is forfeited if goods get sold outside the state. We can not get the refund for the unused ITC. Is this true?

Sara11 (Student) (53 Points)
Replied 21 February 2015

Originally posted by : Sunil Nahar
	I have come across news that the entire ITC is forfeited if goods get sold outside the state. We can not get the refund for the unused ITC. Is this true?