Tamilnadu VAT : Reduction in Set off, Transit Pass & CST Sales

Dayal R Kundani

Amendments in Tamil Nadu Value Added Tax (5th Amendment) Act, 2013 Act /Not/Circular: ACT No. 28 OF 2013 Chennai, 8th November 2013

The Tamil Nadu Assembly has enacted the Tamil Nadu Value Added Tax (5th Amendment) Act, 2013. The major changes which will have far reaching impact are stated here under:

1. Amendment of Section 19- Whenever CST sale is made under Section 8(1) of the CST Act, 1956, the proviso to Section 19(2)(v) as amended  seeks to restrict the [ITC]  input tax credit by providing that credit shall be allowed in excess of 3%. This means that if local purchases attract 5% or 14.5% VAT and the output is sold on CST basis falling under Section 8(1) of the CST Act, the reversal would be to the extent of 3%.

This is likely to increase costs significantly in view of CST sales against C Form for buyers located outside Tamil Nadu.

2. ITC – Retention of Set off – Section 19(4) provided for reversal of ITC in respect of stock transfer. The original provision provided for reversal of 3%. The amendment now provides for 5% reversal.

3. Amendment – Transit Pass –Vegetable oils and Iron and Steel specified in Section 14(iv) of the Central Sales Tax Act, 1956 have been added to Sixth Schedule, which would now require transit pass as referred to in Section 70.

 All these amendments are effective from 11.11.2013.

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Amendment is appended below

GOVERNMENT OF TAMIL NADU

Chennai, 8th November 2013

ACT No. 28 OF 2013

An Act further to amend the Tamil Nadu Value Added Tax Act, 2006

The following Act of the Tamil Nadu Legislative Assembly received the assent of the Governor on the 8th November 2013 and is hereby published for general information:—

BE it enacted by the Legislative Assembly of the State of Tamil Nadu in the Sixty-fourth Year of the Republic of India as follows:-

Short title and Commencement

1. (1) This Act may be called the Tamil Nadu Value Added Tax (Fifth Amendment) Act, 2013

(2) (a) Section 2 shall come Into force on such date as the State Government may, by  notification, appoint.

(b) Section 3 shall be deemed to have come into force on the 1st day of April 2013.

(c) Section 4 shall come into force at once.

Amendment of Section 19

2. In section 19 of the Tamil Nadu Value Added Tax Act, 2006 [Tamil Nadu Act 32 of 2006] (hereinafter referred to as the principal Act),-

(1) to sub-section (2), the following proviso shall be added, namely:-

‘Provided that input tax credit shall be allowed in excess of three per cent of tax for the purpose specified in clause (v).”;

(2) in sub-section (4), for the expression “three per cent of tax”, the expression “five per cent of tax” shall be substituted.

Amendment of Second Schedule

Partial text of the amended Section is appended below:
19. Input tax credit.

(1) There shall be input tax credit of the amount of tax paid or payable under this Act, by the registered dealer to the seller on his purchases of taxable goods specified in the First Schedule:

Provided that the registered dealer, who claims input tax credit, shall establish that the tax due on such purchases has been paid by him in the manner prescribed.

(2) Input tax credit shall be allowed for the purchase of goods made within the State from a registered dealer and which are for the purpose of –

(i) re-sale by him within the State; or

(ii) use as input in manufacturing or processing of goods in the State; or

(iii) use as containers, labels and other materials for packing of goods in the State; or

(iv) use as capital goods in the manufacture of taxable goods.

(v) sale in the course of inter-State trade or commerce falling under sub-section (1) of section 8 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956.).

(vi) Agency transactions by the principal within the State in the manner as may be prescribed.

Provided that input tax credit shall be allowed in excess of three per cent of tax for the purpose of specified in clause (v).

(3) (a) Every registered dealer, in respect of purchases of capital goods for use in the manufacture of taxable goods, shall be allowed input tax credit in the manner prescribed.

(b) Deduction of such input tax credit shall be allowed only after the commencement of commercial production and over a period of three years in the manner as may be prescribed. After the expiry of three years, the unavailed input tax credit shall lapse to Government.

(c) Input tax credit shall be allowed for the tax paid under section 12 of the Act, subject to clauses (a) and (b) of this sub-section.

(4) Input tax credit shall be allowed on tax paid or payable in the State on the purchase of goods, in excess of five per cent of tax relating to such purchases subject to such conditions as may be prescribed,

(i) for transfer to a place outside the State otherwise than by way of sale; or

(ii) for use in manufacture of other goods and transfer to a place outside the State, otherwise than by way of sale:

Provided, that if a dealer has already availed input tax credit there shall be reversal of credit against such transfer.

Section 14

14 : Certain goods to be of special importance in inter-State trade or commerce

 (iv) iron and steel, that is to say,-

(i) pig iron, sponge iron and cast iron including ingot moulds, bottom plates, iron scrap, cast iron scrap, runner scrap and iron skull scrap;

(ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes);

(iii) skelp bars, tin bars, sheet bars, hoe-bars and sleeper bars;

(iv) steel bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or twisted, in coil form as well as straight lengths);

(v) steel structurals (angles, joists, channels, tees, sheet piling Sections, Z Sections or any other rolled Sections);

(vi) sheets, hoops, strips and skelp, both black and galvanised, hot and cold rolled, plain and corrugated, in all qualities, in straight lengths and in coil form, as rolled and in rivetted condition;

(vii) plates both plain and chequered in all qualities;

(viii) discs, rings, forgings and steel castings;

(ix) tool, alloy and special steels of any of the above categories;

(x) steel melting scrap in all forms including steel skull, turnings and borings;

(xi) steel tubes, both welded and seamless, of all diameters and lengths, including tube fittings;

(xii) tin-plates, both hot dipped and electrolytic and tin-free plates;

(xiii) fish plate bars, bearing plate bars, crossing sleeper bars, fish plates, bearing plates, crossing sleepers and pressed steel sleepers, rails-heavy and light crane rails;

(xiv) wheels, tyres, axles and wheel sets;

(xv) wire rods and wires-rolled, drawn, galvanised, aluminised, tinned or coated such as by copper;

(xvi) defectives, rejects, cuttings or end pieces of any of the above categories;

Section 70

70. Issue of transit pass.

(1) (a) When a goods vehicle carrying any goods mentioned in the Sixth Schedule, coming from any place outside the State and bound for any other place outside the State, passes through the State, the owner or other person in-charge of such goods vehicle shall obtain a transit pass in the prescribed form and in the prescribed manner from the officer in-charge of the first check post or barrier, after its entry into the State.

(b) The owner or other person in-charge of the goods vehicle shall deliver within the prescribed period, the transit pass to the officer in-charge of the last check post or barrier, before the exit of the goods vehicle from the State.

(c) If the owner or other person in-charge of the goods vehicle fails to comply with clause (b), it shall be deemed that the goods carried thereby have been sold within the State by the owner or person in-charge of the goods vehicle, and such owner or person in-charge of the goods vehicle shall, notwithstanding anything contained in section 3, be jointly and severally liable to pay tax in accordance with the provisions of this Act, irrespective of the quantum of turnover and also penalty which shall be one hundred and fifty per cent of such tax:

Provided that where the goods carried by such goods vehicle are, after their entry into the State, transported outside the State by any other vehicle or conveyance, the onus of proving that the goods have actually moved out of the State, shall be on the owner or person in-charge of the goods vehicle who originally brought the goods into the State.

Explanation. – In a case where a goods vehicle owned by a person is hired for transportation of goods by some other person, the hirer of the vehicle shall, for the purposes of this sub-section, be deemed to be the owner of the goods vehicle.

(2) (a) When any goods specified in the Sixth Schedule, are sold or consigned or transferred by any goods vehicle to another State from any place within the State, the seller or consignor or transferor of the goods shall obtain a transit pass in the prescribed form and in the prescribed manner, from the assessing authority having jurisdiction over the place from where the goods are sold or consigned or transferred to other State.

(b) The seller or consignor or transferor of the goods shall deliver or cause to be delivered, within the prescribed period, the transit pass to the officer in-charge of the last check post or barrier, before the exit of the goods vehicle from the State.

(c) If the seller or consignor or transferor of the goods fails to comply with clause (b), it shall be deemed that the goods carried thereby have been sold within the State by the seller or consignor or transferor and such seller or consignor or transferor shall, notwithstanding anything contained in section 3, be liable to pay tax in accordance with the provisions of this Act, irrespective of the quantum of turnover and also penalty which shall be one hundred and fifty per cent of such tax.

(3) Save as otherwise provided in sub-sections (1) and (2), the provisions of this Act shall apply in relation to the tax payable under sub-sections (1) and (2) as they apply in relation to the tax payable under this Act.

( Author can be reached at dayalkundani@gmail.com)

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