CA Vinamar Gupta

CA Vinamar GuptaAnalysis of  Changes in Taxation of Yarn and Building Material in Punjab Vat Law effective from Ist April 2016.

Taxation of yarn and building material has been changed  by Excise and Taxation department by introducing Notifications dated 31-03-2016 wef 01-04-2016.  In this write up an attempt has been made to analyse the law with this  advent of Excise and Taxation department.

1. Taxation of Yarn

At present Yarn of all types including yarn waste and sewing thread except cotton yarn is taxable @ 6.05% under Entry No. 134 of Schedule B of Punjab Vat Act. Raw Wool and its waste is tax free under Entry 42 of Schedule A.  Cotton Waste is taxable @ 6.05% as per Entry 27 of Schedule B. Fibre of all types and fibre waste is taxable @ 6.05% as per Entry 39 of Schedue B.  Knitting wool is  also taxable @ 6.05% as per Entry No. 64 of Schedule B.  Also, as u/s 6(7) of Punjab Vat Act there is advance tax on yarn as per Notification dated 04-10-13, on the import of yarn into the into the state of Punjab as under:

Entry No.4All other types of yarn (excluding raw cotton, ginned cotton, shoddy and worsted yarn), partially oriented yarn, fibre, polyester top, polyester chips including waste5.5%
Entry No.10Cotton Yarn4.5%

However vide Notification dated 31-03-2016, effective from 01-04-2016, yarn shall be taxed as under:

(a) All types of yarn (including cotton yarn )their waste and sewing thread shall be taxable @ 3.63% [3.3% +10%]

(b) 100% Polyester filament yarn, polyester top, polyester chips, polyester staple fibre and its waste, acrylic fibre shall be taxable @ 6.05%[5.5% +10%]

Further advance tax rates have been changed as under wef  01-04-2016:

All types of yarn (including cotton yarn )their waste and sewing thread3.3%
100% Polyester filament yarn, polyester top, polyester chips, polyester staple fibre and its waste, acrylic fibre5.5%

Comments:

1. Rate of tax on all types of yarn including cotton yarn, sewing thread, wollen yarn etc. gets reduced from 6.05% to 3.63%.

2. Sewing Thread is cotton yarn and hence declared goods as per Madras High Court In RV Krishaniah [92 STC 262]. Hence sewing thread can not be charged to maximum tax @ 5%.

3. Following items were earlier excluded from advance tax

(a) Raw Cotton

(b) Ginned Cotton

(c) Shoddy Yarn

(d) Worsted Yarn

However these items have not been excluded in Notification dated 31-03-2016.

Raw Cotton and Ginned Cotton is not yarn and gets covered by fibre presently taxable @ 6.05% as per Entry 39 of Schedule B but at the same time cotton is decalred goods and maximum rate can be 5% only. Hence omission to exclude raw cotton and ginned cotton shall not affect the advance tax regime on these items. However Shoddy yarn is used to manufacture blankets which is tax free under entry 59 of Schedule A. At the same time worsted yarn is used to manufacture shawl and shawl being textile fabric gets covered by Entry 52 of Schedule B and is also tax free. Earlier since shoddy yarn and worsted yarn were outside the purview of advance tax and blankets and shawls were also tax free, the manufacturers were not required to get themselves registered under Punjab vat law. However, by omission of exclusion of shoddy and worsted yarn, the shawl and blanket manufacturers of Punjab shall either pay advance tax on entry of shoddy and worsted yarn or shall have to obtain registration and apply for advance tax exemption like Knitting Industry.

4. Taxation of Building Material

At present

a) Bricks of all kinds including fly ash bricks, refractory bricks and ashhaltic roofing earthern tile are taxable @ 6.05% under entry no. 13 of ScheduleB.

b) Lime stone, clinker and dolomite is taxable @ 6.05% as per Entry No. 68 of Scheule B

c) River Sand is taxable @ 6.05% as per Entry 97 of ScheuleB .

d) Stone Bajri, Crusher Sand and Stone Dust is taxable @ 6.05% as per Entry 145 of SCheduleB.

e) Timber and Scaffolding is taxable @ 6.05% as per Entry 170 & 171 of Schedule B.

f) Iron and Steel goods are taxable @ 3.85% as per Entry 21 of Schedule E.

g) Cement is taxable @ 14.30% being covered by Schedule F.

However vide notification dated 31-03-2016  effective from 01-04-2016, stone bajri has been excluded from Entry 145. Further Vide Entry 30 of Scheudule E, stone bajri and sand when carried in tractor trolley has been taxed @ Rs. 4000 per trip; when carried in truck having capacity of 9 Metric ton has been taxed @ Rs. 7000/- per trip; For being carried in bigger vehicle rate is Rs. 10000/- per trip.

Comments:

  1. The word “Trip” has not been defined in Punjab Vat Act. Trip means a journey in which one goes somewhere and comes back again. Say a truck of crusher from Pathankot travel to Jammu, offloads the crusher there and then comes back again laden with crusher from Jammu to Pathankot. Hence it should be defined as to whether return journey is separate trip or not.
  2. Crusher Sand still remains covered by Entry 145 and River Sand still stands covered by Entry No. 97 of Schedule B. But at the same time sand has been covered by special trip wise taxation under Schedule E. This shall lead to confusion and needs immediate clarification.
  3. In case of Inter state purchase, there shall be no tax, hence buyers may prefer to purchase stone bajri and crusher from outside the state because of hefty taxation imposed per trip. The dealers and buyers in Punjab might suffer heavily due to this taxation.
  4. Further the tax has been imposed wef 01-04-16 without providing any time to ponder over and spread any message about this taxation.

Conclusion:  The issues raised in this article reveal that nuts and bolts of new notifications are required to screwed up before their implementation is set in motion. The better wisdom is not to issue the important notifications which impact the masses at eleventh hour of their implementation so that at least foreseeable glitches may be removed.

(Author :CA Vinamar Gupta, 53-E, DayaNand Nagar-II, Lawrence Road, Amritsar, Mob: 9356048001, ca.skumargupta@gmail.com)

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