R.K Rengaraj, Advocate

Introduction: In order to boost the manufacturing sector bogged down by negative sentiments, the State Government has come forward with some relief in electricity tax, and reversal on Input Tax credit when stocks are moved out of State in pursuance of stock transfer, interstate sales etc., in the budget presented on 25.03.2015 in the TN State Assembly. There are already cases pending before the Appellate levels/Higher Forums as to whether the reversal of Input tax credit is applicable for manufacturing sectors for interstate sales with ‘C’ Forms but in the current budget, the said proviso is withdrawn. A big relief to the industries as a whole. Also no new tax is proposed in the budget. The salient features of the TN State Budget are:

a) Electricity Tax on generating plants using Biomass (excluding bagassee) will be withdrawn to give a boost to green energy producers.

b) Input Tax Credit reversal imposed at the rate of 3 per cent on the inter-state sale of goods as per proviso to section 19(2) (v) of Tamil Nadu Value Added Tax Act 2006, which was introduced with effect from 11.11.2013 will be withdrawn henceforth to make the manufacturing industries in Tamil Nadu more competitive with their counterparts in the neighboring States.

c) Clause (c) under Section 19(5) of TNVAT Act, 2006 will henceforth be withdrawn to enable the dealers to claim Input Tax Credit on the inter-State sale of goods without ‘C’ form. This measure will eliminate additional burden on the dealers effecting inter-State sale of goods without ‘C’ form.

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d) Fishing accessories like fishing ropes, fishing floats, fishnet twine, fishing lamps and fishing swivels will be exempted from the present levy of VAT.

e) Mosquito nets of all kinds will be exempted from the present levy of VAT at 5%.

f) Works contract relating to sizing of yarn will be exempted from the present levy of VAT.

g) VAT on cardamom will be reduced from the present levy of 5% to 2%.

h) VAT on LED lamps of all kinds will be reduced from the present levy of 14.5% to 5% to encourage the use of energy saving devices.

i) VAT on air compressors, pump sets up to 10 hp and their parts thereof will be reduced from the present levy of 5% to 5% to encourage MSME Sector and to benefit the agriculturists in the State.

j) VAT on cellular telephones (mobile phones) will be reduced from the present levy of 14.5% to 5%.

Conclusion: When the recent Central Budget is presented expecting GST in the year 2016, the State Budget is silent about the implementation of the GST in the state. . The withdrawal of the ITC reversal will make the manufacturing industries in Tamilnadu, more competitive certainly.

(The author can be reached at renga42002@yahoo.co.in)

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35 responses to “Tamil Nadu Budget 2015-16 Changes in VAT”

  1. rajendra says:

    what is vat rate in readymade garment in tamilnadu

  2. rajendra says:

    Dear Sir
    what is the Vat tax rate in readymaed Garments in Tamilnadu

  3. shefeek says:

    Dear Sir

    What is the VAT Tax Rate for Honey in tamilnadu.

    Thanks and Regards
    Shefeek

  4. shefeek says:

    Dear Sir,

    Please let me know the VAT tax Rate for Honey in Tamilnadu,

    Thanks & Regards
    Shefeek

  5. kumar says:

    But when we buy water bottle in 5 Star hotels & resorts , there are charging the more then MRP rate is that correct ? with all tax’s

  6. Sanu Kumar says:

    not at all, they cant charge more than MRP at any cost . you can claim in consumer forums

  7. GOPINATH.S says:

    dear sir ,
    one of the hotel charging on water bottle more than mrp price i ask the shop person he said we have trade mark licence so we are charging .. its is correct if got tm licence is their rule to collect …

  8. senthilkumar says:

    Dear Sir ,

    Based on Headphone & Earphones present tamilnadu vat structure clarify purpose .

    Kindly do the needful .

    M.Senthilkumar

  9. A.Jayavelu says:

    We are having around Rs.7,00,000/- ITC. We are selling 0% sales to SEZ unit.
    ST authority is institing to reverse ITC. Is it OK sir.

  10. MANISH says:

    WHAT IS THE G.O NO RELATING TO TAX EXEMPTION IN MOSQITO NET

  11. Rameshkumar R says:

    dear sir, kindly give your feedback. we have involved a interior carpentry work contract for our new house in Chennai thru a firm that involves wood work, fixing of certain items like tube lights, exhaust, sink etc. also some electrical wiring modification. The contractor charges service tax for the total amount that includes carpentry work, fixing charges for the kitchen wares (sink/ tap/ lights etc, and labour for wiring modification. My clarification is whether labour/ fixing charge attracts service tax? kindly revert. Regards. Rameshkumar. R

  12. Prasanna Kumar Rout says:

    Sir,
    Regarding subject to Input Tax Credit reversal imposed at the rate of 3 per cent on the inter-state sale of goods as per proviso to section 19(2) (v) of Tamil Nadu Value Added Tax Act 2006, which was introduced with effect from 11.11.2013 – I have not taken reversal credit for the year 2014-15. What will be the action & its solutions?

  13. Nantha says:

    Hi Sir,

    Regarding LED Lamps the VAT has been reduced from 14.5% to 5%. i need clarification regarding LED Driver(Power supply) we have to bill in 5% or 14.5%, kindly clarify …

  14. hari says:

    Dear Sir,

    I purchase in Tamil Nadu, i sell in other state, what is i collect rate of duty.

  15. N SEKAR says:

    Sir,

    As per the amended sec19 (5),can we taken ITC of inter-state purchase without form C,just what we are doing against Vat 5%.

    Pl.advice

  16. K.A.TALATI says:

    Appreciated TN VAT article.

    PLEASE POST THE UPDATES.

    Request you to high light the procedure for goods on consignment basis.
    and also request you to give your contact details.

    Proposing to start business in MEDICAL EQUIPMENT, DEVICE AND IMPLANTS SR NO 2081.
    Is there is any VAT exemption .IN OTHER STATES IT IS EXEMPTED .

    Thanks n regards,

    K.A.TALTI
    MUMBAI
    09819152797

  17. Shah says:

    Dear Sir,

    I would like to have clarity on the levy of LED which is reduced to 5%. We also would like to know the commodity code for the same. Kindly oblige and enlighten us.
    Thanks

  18. Vinoth says:

    @ Rengaraj

    Thank you Sir 🙂

  19. boopathy says:

    Sir ,
    Pl clarify the led tax reuction details.There was some confusion is going on.

    we came to know that,LED Lamps without driver to be charged by 5% and LED Lamps with driver to be charged by 14.5%
    is it true? if it is false pl clarify the same.

  20. Rengaraj says:

    @Vinodh- Spare parts and accessories of mobile also attracts 5%. This is as per Sect 3 (2) of the TNVAT Act, where it says the rate is applicable as that of the goods.

  21. Vinoth says:

    Hi Sir,

    What is the percentage for Mobile Phone Spare Parts and Accessories.Before that 14.5% of Spares Parts and Accessories.
    is it 5% Tax applicable for Spare Parts also ?

    Kinldy do the needful

    Thanks
    Vinoth

  22. Dayanandhan says:

    Sir, Whats the effective date of above said taxes

  23. jayachandran says:

    sir what is the percentage for mobile phone(cellular phone) accessories
    for mobile now 5% and what about mobile phone accessories
    pls help me sir

  24. Rengaraj says:

    @ Arvind Jain, Sir, the proviso is not applicable to stock transfer and hence reversal continues for stock transfer to other states -Section 19(4) (i). The Amendment G.O for interstate sale with C form and without C form has been published today giving effect from 1st April, 2015.

    regards,

    rengaraj r.k

  25. Arvind Jain says:

    Whether this provsion is appliable to Stock Transfer?

  26. Rengaraj says:

    @ Mohan G: I have mentioned in the comments side that there is a typographical error. The rate is reduced from 14.5% to 5%. Kindly see the first comment sent by me.

    rengaraj r.k

  27. GANESH-N says:

    R.K Rengaraj, Advocate

    Thank you Mr. Regaraj.

  28. Mohan.g says:

    Dear Sir,

    Inrespect of Motors up to 10 H.P it was mentioned that the rate of Tax reduced from 5% to 5%. Is it OK.
    Thanks & Regards

  29. J.Janarthanan says:

    To:

    Advocate Mr.R.K Rengaraj,

    Sir,

    At the outset appreciate your article on changes in TNVAT Budget 2015-16.

    Very nice and crystal clear presentation.

    Thank You.

    J.Janarthanan

  30. Rengaraj says:

    Dear Mr Ganesh N,

    The reduction of Tax rate G.O has been published and the reduction is effective from 1st April, 2015 as per the G.O.

    regards,

    rengaraj r.k

  31. GANESH-N says:

    The Go’s Notification is still not published and not clear whether the amended section 19(2_ (v) is retrospective act

  32. P N V GIRI says:

    Sir, Although, there is no relevance to the new tax benefit discussed by you, I would like to know the status of works contract, i.e.for the scaffoldings, wooden blanks, iron rods being given on hire basis for construction activity. Some people say 14.5% Vat while others say 2% under Form L! Since there has been no clarity, it would be of great help if knowledgeable people like you guide.

  33. BHARAT.N.PARIKH says:

    UNDER TN VAT ACT. IF STOCK TRANSFER DONE TO OTHER STATE, THEN WHAT ABOUT INPUT TAX REVERSAL. IF POSSIBLE PLEASE REPLY.

  34. V V Balakrishnan. says:

    h) VAT on LED lamps of all kinds will be reduced from the present levy of 5% to 5% to encourage the use of energy saving devices.

    i) VAT on air compressors, pump sets up to 10 hp and their parts thereof will be reduced from the present levy of 5% to 5% to encourage MSME Sector and to benefit the agriculturists in the State. – See more at: https://taxguru.in/goods-and-service-tax/tamil-nadu-budget-201516-vat.html#sthash.j1ybXSrL.dpuf

    I feel there seem to be typographical error in showing the present tax rate & the proposed correction.Can we have a clarification on this please.

    VV BAlakrishnan.
    Mob:9849054860.

  35. Rengaraj says:

    Dear Netizens,

    There is a typographical error in the the serial no.h and i in the article submitted by me. Kindly read it as “will be reduced from the present levy of 14.5%” instead of 5%.

    rengaraj r.k

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