Tuesday, August 21, 2012

What is Set-Off of VAT Input Tax Credit and Set-Off of tax paid on capital goods

Set-Off of Input Tax Credit –
Credit will be available of tax paid on inputs purchased within the State. Credit will not be available of certain goods purchased like petroleum products, liquor, petrol, diesel, motor spirit (position of furnace oil is not clear in white paper, but many States do not give credit). No credit is available in case of Inter-State purchases.

Set-Off of tax paid on capital goods –
Credit will be available of tax paid on capital goods purchased within the State. Credit will be available only in respect of capital goods used in manufacture or processing. The credit will be
spread over three financial years and not in first year itself. There will be a negative list of capital goods [para 2.4 of White Paper on State-Level VAT] States has deviated from these provisions. In West Bengal and Kerala, it is available in 36 monthly instalments. In Karnataka, it is available in 12 monthly instalments, but value of capital goods should be minimum Rs 10 lakhs. Capital goods of value less than Rs 10 lakhs will be 'inputs' and immediate credit will be available. In Maharashtra, entire credit is available
immediately.

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