The Hindu Business Line : Delhi VAT department rejects trade plea

TRADE and industry's demand that no time limit must be fixed for obtaining input tax credit on all tax paid opening stock has been rejected by the Delhi Value Added Tax (VAT) department.

Input tax credit is the credit for tax paid on inputs. A dealer is required to pay tax after deducting the input tax he had paid from the total tax collected by him.

Responding to a memorandum submitted by the PHD Chamber of Commerce and Industry (PHDCCI), the office of the Deputy Commissioner of VAT, New Delhi held that "this cannot be allowed as it would have adverse implication on revenue collection and tracking of transaction."

The Delhi VAT law provided that input tax credit could be claimed on the stock of goods on the date of implementation of VAT. It specified that all taxed stock purchased between April 1, 2004 and March 31,2005 would be eligible for input tax credit.

The white paper on VAT specified that input-tax credit would be available for over six months after an interval of three months needed for verification.

It held that all tax-paid goods purchased on or after April 1, 2004 and still in stock as on April 1, 2005 would be eligible to receive input-tax credit, subject to submission of requisite documents. Resellers holding tax-paid goods on April 1, 2005 were also eligible for input tax credit.

The white paper specified that VAT will be levied on the goods when sold on or after April 1, 2005 and input tax credit would be given for the sales tax already paid in the previous year.

Meanwhile, the Delhi VAT department also defended the introduction of concept of fair market value. The Deputy Commissioner of VAT held that the concept of fair value has been introduced to check under/over invoicing in sale transactions and was necessary to secure Government revenue.

On its part, the trade submitted that the concept of fair market value should be applicable only in transactions between related parties.

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