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The Punjab Value Added Tax Act 2005 has been amended vide Notification No. 49-Leg/2013.- Dated 15th November, 2013. A number of amendments have been made by this notification. Amendments made to section 6 of Punjab Vat Act, 2005 have been analysed in this article.

Amendment in Section 6 of Punjab Act 8 of 2005

In the principal Act, in section 6, for sub-section (7) the following sub-section shall be substituted namely:-

(7) (a) Notwithstanding anything contained in this act or the Rules made there under the State Government may by notification specify The goods on which a taxable person shall pay tax in advance at the rates notified by the Government but not exceeding the rates including surcharge applicable on such goods under this Act when he imports such goods into the State subject to such conditions as the State Government may specify in the notification the aforesaid payment of tax in advance shall be counted towards the final tax liability of the taxable person:

Provided that the State Government may by notification exempt any taxable person or class of taxable persons from payment of tax in advance or reduce the rate of payment of tax in advance subject to such conditions, as may be notified:

Provided further that if on an application made by a taxable person, the Commissioner or an officer authorized by him, after verifying all aspects of the case, arrives at a decision that such taxable person should be exempted from payment of tax in advance or that the rate of payment of tax in advance should be reduced for such taxable person, he may do so and impose such terms and conditions on such taxable person as he may deem fit.

Explanation– The taxable person, who imports goods into the State, shall pay tax in advance, on the presumption that such goods are meant for the purposes of sale or for use in manufacture or processing of goods meant for sale, unless, it is proved otherwise by such taxable person. It is further presumed, unless, it is proved otherwise by such taxable person, that such goods or any product manufactured there from, shall not be sold below the price at which such goods have been purchased and imported in the State.

(b) The tax already paid in advance under the provisions of subsection (7) of section 6 as it existed prior to commencement of the Punjab Value Added Tax (Second Amendment) Act, 2013, shall be deemed to have been paid tax in advance under the provisions of clause (a).”.

These amendments relate to sub-section (7) of section 6 and provides:

i)        That by issuing a notification the State Government may specify such goods, on which a taxable person shall be required to pay tax in Advance

ii)        The rates shall also be notified by the Government, which shall not exceed the rates including surcharge applicable on such goods under this Act.

iii)      The advance tax shall be payable whenever such goods are imported into the State of Punjab.

iv)       The advance tax shall be counted towards the final tax liability of the taxable person means that No ITC is available against the payment of advance tax.

v)         That the State Government may by notification exempt any taxable person or class of taxable persons from payment of tax in advance or reduce the rate of payment of tax in advance subject to such conditions, as may be notified.

vi)       That on an application made by a taxable person, the Commissioner or an officer authorized by him, after verifying all aspects of the case, arrives at a decision that such taxable person should be exempted from payment of tax in advance or that the rate of payment of tax in advance should be reduced for such taxable person, he may do so and impose such terms and conditions on such taxable person as he may deem fit.

By way of explanation it has also been provided that the  taxable person, who imports goods into the State, shall pay tax in advance, on the presumption that such goods are meant for the purposes of sale or for use in manufacture or processing of goods meant for sale, unless, it is proved otherwise by such taxable person. It is further presumed, unless, it is proved otherwise by such taxable person, that such goods or any product manufactured there from, shall not be sold below the price at which such goods have been purchased and imported in the State.

In my opinion there is a legal infirmity cum lacuna in this amendment. The basis of levy of advance tax has been made import of goods into the State of Punjab, which is violation of Article 301 of the Indian Constitution. It is a restriction on free movement of goods and is beyond the legislative powers of the Government of Punjab.

Further what are the consequences if goods are used otherwise than by way of sale or are sold below the purchase cost has not been specified? Whether advance tax paid will be refunded/ reversed / available for ITC to the taxable person? Or the taxable person will be penalised for rebuttal of his presumption? Furthermore what are the terms and conditions for applying exemption from payment of advance tax has not been specified in the notification.

Prior to amendment section 6 stood as under:

SECTION 6: INCIDENCE OF TAX

6.(1)   Every person, except a casual trader and one dealing exclusively in goods declared tax free under section 16, whose gross turnover during the year immediately preceding the commencement of this Act or during any year subsequent thereto, exceeded the taxable quantum, as provided in clause (a) of sub-section (3), shall be liable to pay tax under this Act by way of VAT on the taxable turnover.

(2)      Every person, except a casual trader and one dealing exclusively in goods declared tax free under section 16, whose gross turnover during the year immediately preceding the commencement of this Act or during any year subsequent thereto, exceeded the taxable quantum, as provided in clause (b) of sub-section (3), shall be liable to pay tax under this Act by way of TOT on the taxable turnover.

(3)      For the purpose of this section, the expression taxable quantum means-

(a)      for registration as a taxable person for VAT –

(i)       in relation to any person, who imports taxable goods for sale or use in manufacturing or processing any goods in the State, rupee one;

(ii)      in relation to a person, who receives goods on consignment/branch transfer basis from within or outside the State on which no tax has been paid under this Act, rupee one;

(iii)     in relation to a person, liable to pay purchase tax under section 19, rupee one;

(iv)     in relation to a person, who is a manufacturer, rupees one lac;

(v)       in relation to a person, who is running hotel/ restaurant, rupees five lac;

(vi)      in relation to a person, who is running a bakery, rupees ten lac;

(vii)    in relation to voluntary registration, rupees five lac; and

(viii)             in relation to any other person, rupees  [ fifty lac.]

(b)      for registration as a registered person for TOT

in relation to a person other than those specified in clause (a) whose turnover during the year immediately preceding the commencement of this Act or during any  year subsequent thereto, is more than rupees five lac, but below rupees  fifty lac.

(4)      Every person, who has become liable to pay tax under this Act, either by way of VAT or TOT, shall continue to be so liable, until the expiry of three consecutive years during each of which his gross turnover does not exceed the taxable quantum and such further period after the date of such expiry, as may be specified by notification by the State Government and on the expiry of such specified period, his liability to pay tax, shall cease.

(5)      Every person whose liability to pay tax has ceased under sub- section (4), shall again be liable to pay tax under this Act from the date on which his gross turnover again exceeds the taxable quantum.

(6)      Every casual trader shall be liable to pay tax under this Act by way of VAT on the taxable turnover including sales through agent within the State.

(7)     Notwithstanding anything contained in sub-section (1) to sub-section (6), the state Government shall charge the tax in advance on the import of goods to be notified in such manner, as may be prescribed, and as such rates, as may be notified, but not exceeding the rates applicable on such goods under this Act:

Provided that such goods are meant for sale or use in manufacturing or processing of any goods for sale:

Provided further that such tax collected in advance , shall be counted towards final liability of the taxable person at the end of each tax period

(8)     The tax collected under the Punjab Tax on entry of goods into local areas Act, 2000 (Punjab Act no 9 of 2000), shall be deemed to have been collected under the provisions of sub- section (7).

———————-

CA Narinder Gupta
Narinder Gupta & Co.
47- Near New Judicial Court Complex,
Opposite Judge’s Residence Gate
Rajpura – 140401
9779023228, 9417023228

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