Wednesday, August 3, 2011

Q.We are dealing in lab apparatus, chemicals and other equipment required by schools, colleges, industries etc., for their labs. We know that our items are scheduled in two types, one at 4% and the balance items under 12.5% as VAT. Our problem is we deal in a number of chemicals which are used in labs for testing, research etc. As per your notification, certain chemicals are put under one category which is used as industrial input for which the tax is 4% and buyers can take advantage of rebate on such taxes. It is okay if it is used as industrial input, but what if used in pathology labs, college & School labs, hospital labs etc? (Karnataka VAT)

Ans. Please refer to the list of industrial inputs published on May 1, 2005. In that list 195 items with sub-items have been identified as industrial input for the rate of tax at 4%. Those goods would be liable for rate of tax of 4% irrespective of the end-user identification, that is irrespective of whether the buyer is an industry, retailer or consumer, etc,. The earlier system of declaration to identify the industrial user has been done away with. The list of chemicals mentioned by the Commercial Taxes department is quite vague. There are hundred and thousands of other chemicals originated from Ammonia, Chlorine, Oxygen and a number of metals such as iron, manganese, lead and so on. Not only that, there are a number of chemical compounds in Organic Chemistry. We cannot enlist that here. The VAT is at 4% on the chemicals you have pointed out, but what about other chemicals which are not enlisted by the department. In our opinion, if it is a chemical whether it is organic or inorganic the rate of tax should be one type, either 4% or 12.5%. Earlier, the KST was 4% and, hence VAT also may be kept at 4%. There is a category as papers of all kinds including blotting, carbon paper etc., but what about filter papers of imported make as well as Indian make, made either by machine or hand? We deal in papers such as testing papers namely litmus paper, starch paper etc., which are made of filter papers. Please clarify the rate of tax on these? The industrial input list released on May 1, 2005 is quite exhaustive and it deals with a wide range of chemicals with Central Excise classification codes. Those goods not identified in that list are taxable at 12.5%. As regards the filter paper, litmus paper etc, the rate of tax is 12.5%. Regards G.Srinivas

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