CA Praveen Kapoor

Under the provisions [See Sec. 3(3) & Sec. 7(1)(b)] of Haryana Value Added Tax Act, 2003 If a dealer liable to pay tax under HVAT Act,2003 purchases or receives any taxable goods in the State from any source in the circumstances that no tax is levied or paid under HVAT Act,2003    and he either exports them out of State or uses or disposes them of in the circumstances in which no tax is payable under HVAT Act,2003 or the Central Act by him to the State on them or the goods manufactured therefrom, then, he shall be liable to pay tax @4%  on the purchase or receipt thereof [or such lower rate , if any notified by the state government.

 Example 1 – A VAT dealer in Haryana purchases goods amounting to Rs 5000/- from unregistered dealer on which no tax is payable under HVAT Act, 2003 and Subsequently he transfers the goods or goods manufactured there from to his branch in Uttar Pradesh. Since, on branch transfer no tax is payable under HVAT Act,2003 or CST Act, 1956 the VAT dealer shall be liable to pay purchase tax @4% on Rs 5000/-=Rs.200/-

Example 2-‘X’ a Vat dealer purchases Stationery of Rs.5000/-from unregistered dealer in Haryana for resale in his shop.  He instead of selling the goods, gifts them to his office staff.  X will be liable to purchase tax @4% on Rs.5000/-=Rs.200/- to the Haryana Govt.

Purchase tax is applicable on the purchase or receipt of goods from outside Haryana:-

As per clarification issued by Haryana VAT Authorities in the case of M/s Food Corporation of India, Panchkula.( Issued vide letter No.1203-05/ST-I, dated 25-08-2009 uploaded on Haryana Govt.’s website on 01.09.2009),Purchase tax is not applicable on goods purchased  or received from from outside Haryana.Thus purchase tax in Haryana is applicable on the  goods purchased or received from within Haryana only.Relevant part of the clarification is reproduced below:-

“As per section 3(3) reproduced above liability to pay tax on the purchases or receipt there of arises under the circumstances when a assessee purchases or receives any taxable goods in the state. Thus, the goods, to attract tax under this section should have been purchased from within Haryana State. This point is further made clear in the following lines viz from any source in the circumstances that no tax is levied or paid under this Act. This expression makes it amply clear that purchase tax liability under the amended sub section 3(3) is incurred only when such goods are purchased or received from within Haryana state and no any tax liability is incurred in regard to receipt of goods which have been received from any source outside the State. The point is further made clear in the preamble of the Act which states that it is an Act to provide for levy and collection on the sale or purchase of goods in the State of Haryana and matters incidental thereto”

Purchase Tax not applicable in case of export of goods out of India:

However proviso to Section 3(3) of the HVAT Act, 2003 specifically provides that purchase tax shall not be payable if  the same goods or the goods manufactured therefrom are sold in the course of export out of territory of India. Thus in case of export of same goods or goods manufactured therefrom out of the territory of India, no purchase tax has to be paid to the State of Haryana.

Exception to the rule that Purchase Tax is not applicable in case of export of goods out of India:

However proviso to section 3(3) doesn’t apply to goods specified in schedule ‘F’. Thus all the goods specified in schedule F are liable to purchase tax even if those goods or goods manufactured therefrom are exported out of the territory of India. But at present no goods are specified in schedule ‘F’ ,which practically means that there are no goods(or goods manufactured therefrom on the export out of India of which purchase tax is presently payable.However Govt. may amend Schedule F any time and add any number of goods to it .In such a case goods specified in the Schedule F or goods manufactured from goods specified in Schedule F will be liable to purchase tax even if they are exported out of India. For example in future Govt. may include Rubber in Schedule F . In such a case purchase tax will be payable on the export out of India  of rubber as such or export of goods manufactured from that rubber.

Purchase tax to be paid Proprtionately in some cases:-

Second proviso to Section 3(3) reads as under:-

“that where the goods purchased or received are used or disposed of partly in the circumstances mentioned in the foregoing provisions of this sub-section and partly otherwise, the tax leviable on such goods shall be computed pro rata.”

This proviso means that if some of the taxable goods purchased from within the State of Haryana ,on the purchase of which no tax has been paid to the State of Haryana, are used in  or disposed of  in the circumstances in which no tax is payable under HVAT Act,2003 or the Central Act by a dealer to the State on them or the goods manufactured therefrom,then purchase tax shall be payable only on those goods which have been so used or disposed of   and not on the goods which have been used otherwise(i.e. which have not been so used or disposed of)

Example- A Vat dealer has purchased goods worth 15000 from an unregistered dealer in Haryana.He gifts goods worth Rs. 5000(1/3rd of total goods) to his friend.He sells remaing goods during the course of his business.The VAT dealer shall be liable to pay purchase tax (15000*1/3*4%)=Rs.200/-only.

Rate of Purchase Tax:-

Section 7(1)(b) which prescribes the rate of purchase tax  is reproduced below:-

“7(1)(b)   the purchase of goods shall be calculated at four per cent or such lower rate applicable on sale of such goods had it been a sale falling under clause (a):

Provided that the State Government may, by notification in the Official Gazette, direct that the tax shall be calculated at a lower rate.”

Thus rate of purchase tax is generally 4%.But if rate of sale of goods is lower than 4% then such lower rate will be the applicable rate of purchase tax.For Example gold  of Rs. 20000/- is purchased from an unregistered dealer without paying any tax  in Haryana and the same is transferred to the dealer’s branch in Delhi , then purchase tax @1% shall be payable .This is because tax on the sale of gold in Haryana is 1%(less than 4%).Further the Govt. may prescribe lower rate(i.e. lower than otherwise applicable rate).For example Govt. may prescribe 0.25% (i.e. less than actual rate  of 1%)as the rate of purchase tax on gold. Also Govt. may prescribe 2%  as rate of purchase tax on Rubber(i.e less than otherwise applicable purchase tax  rate of 4%).However it may be noted that till date Govt. has not issued any notification prescribing lower rate of tax  which practically means that at present purchase tax on all the goods is 4%.

(Author can be reached at pkc2003@gmail.com)

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One response to “Purchase tax under Haryana Value Added Tax Act,2003”

  1. ghorla says:

    sir
    i thanks for above said knowledge
    hereby i want to know that
    is pro rata tax is applicable when goods are purchased on cst (out of Haryana ) and sold exempted goods in haryana

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