GOVERNMENT OF ANDHRA PRADESH

COMMERCIAL TAXES DEPARTMENT

PROCEEDING OF THE

AUTHORITY FOR CLARIFICATION AND ADVANCE RULING

(Under Section 67 of APVAT Act, 2005)

Present : Sri T.Yugandhar Reddy, Additional Commissioner (Policy)

Dr. Sri K.Raghavaiah, Joint Commissioner (DMU & All Acts)

Sri P. Satyanarayana Reddy, Joint Commissioner(Legal)

CCT's Ref.No.A.R.Com/229/2006 Dt: 21-4-2007

Ref: CCT'S Ref.No.PMT/P&L/A.R.COM/2005, Dt:13-4-2005.

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O R D E R:

M/s. Cyberabad Convention Centre Private Limited, Hyderabad (TIN No.28230294420) have filed an application and sought clarification and Advance Ruling under Section 67 of the APVAT Act, 2005 read with Rule 66(2)(i) of APVAT Rules,2005 along with the application fee of Rs.1000/-. The application is examined and found in order. Hence admitted.

The applicant is seeking clarification on the following :

1. Whether the purchasing VAT dealer is entitled to claim input tax credit in respect of the tax charged by the seller in the tax invoice issued by the seller.

2. The purchasing VAT dealer is responsible to restrict the same to the rate applicable to such goods as per the provisions of the A.P.VAT Act, 2005 and the schedules there under particularly when the seller is obliged to deposit the tax collected with the authorities.

The case was posted for hearing on 31.3.2007. Sri T.Vinod Kumar, Advocate and Authorised Representative of the firm appeared and explained the case.

It was explained that the applicant is purchasing various food items to cater to their customers and the suppliers are charging VAT at 12.5% on 60% of the value but some of the suppliers are charging 12.5% on full value of the goods. It was also stated that they purchase some raw materials for preparation of food items and suppliers are found to be charging different rates of tax for the same items. It is contended by the applicant that they are claiming input tax credit on the basis of the tax component in the invoice. They are seeking to know whether the buying VAT dealer is required to restrict the claim of input tax credit on the basis of the correct rate of tax applicable to the goods purchased eventhough the supplier charged higher rate and deposited such tax to the tax department.

The issue has been examined with reference to provisions relating to input tax credit mechanism under Section 13 of the Act and Rule 20 of the Rules. Sub section (1) of Section 13 specifies that an input tax credit shall be allowed to the VAT dealer for the tax charged in respect of all purchases of taxable goods made by that dealer during the tax period if such goods are for use in the business of the VAT dealer. Sub rule (3) of Rule 20 prescribes that where all the sales of a VAT dealer for that tax period are taxable, the whole of the input tax may be claimed as credit excluding the tax paid on the purchases of any goods mentioned in sub rule (2). Sub rule (2) of Rule 20 specifies certain items which are not eligible for input tax credit. Clause (d) prescribes that any goods purchased and used for personal consumption are not eligible for input tax credit. Clause (f) prescribes that any goods purchased and accounted for in the business but utilized for the purpose of providing facilities to the employees including in residential accommodation are not eligible for input tax credit. Taking the above provisions into consideration, the ruling is given as under :

1. The applicant is entitled to claim input tax credit based on the quantum of tax charged in the tax invoice issued by a registered VAT dealer in the State.

2. The applicant shall restrict input tax credit as prescribed in sub rule (2) of Rule 20.

3. The applicant may ask the supplying dealer to seek clarification by way of advance ruling if there is any ambiguity regarding applicable tax rates on the goods sold by them.

4. The CTO concerned of the applicant shall cause verification of the purchases made by the applicant and take up necessary verification at the other end to ensure that excess tax charged in the invoice issued to the applicant is paid to the department or not. If for any reason is appropriated by the dealer himself, suitable action may be initiated by the CTO concerned.

Note: An appeal against this proceedings can be filed before the Sales Tax Appellate Tribunal, A.P., Hyderabad within 30 days of this ruling.

ADDL/JT.COMMISISONER