Determination of Assessable Value by units availing VAT remission in J & K
Notification SRO-91 dated 16.03.2006 issued by the Government of J & K states that every registered industrial unit claiming VAT remission shall make price adjustment in the selling price equivalent to the amount of tax chargeable on the finished goods sold, whereafter the tax shall be charged on the net selling price so that the benefit of such price adjustment is passed on to the purchasing dealer/consumer. In order that transparency is maintained in the transactions, every sale invoice shall invariably mention the amount of price adjustment made in the selling price. In case no price adjustment is made the industrial unit shall not be entitled to any tax remission. The scheme of remission is elaborated with the following illustrations in the said Notification:
In the illustration at “a” below there shall be no remission of tax while in the illustration at “b”, there shall be remission of Tax
a. No remission of Tax
Qty | Description of goods | Unit price | Value (Rs.) | VAT Rate | Amount of VAT (Rs.) |
|---|---|---|---|---|---|
1 | Transformer | 10000 | 10000 | 4% | 400 |
Total | 10000 | 400 | |||
Total Amount Paid by the Buyer = Rs. 10,400.00 (Rs 400 is paid by the manufacturer to the state as VAT hence total value of transaction for the manufacturer is Rs 10000)
b. Price adjustment Method for tax remission.
Qty | Description of goods | Unit Price | Value(Rs.) | VAT Rate | Amount of VAT(Rs) | ||
|---|---|---|---|---|---|---|---|
Before Price adj. | PriceAdjustment | Net unitPrice | |||||
1 | Transformer | 10,000 | 384.6 | 9615.4 | 9615.4 | 4% | 384.6 |
Total | 9615.4 | 384.6 | |||||
Total Amount Paid by the Buyer = Rs 10,000 (Since no VAT is paid to the State, total value of transaction for the manufacturer is Rs 10000) | |||||||
In the illustration at ‘a' above, the transaction value of Rs 10,000 is exclusive of the VAT and the VAT of Rs 400 is charged separately from the customer and paid to the exchequer. In this case, as there is no remission of VAT by the state, the price inclusive of excise duty is Rs 10,000 from which the transaction value for the purpose of excise duty shall be determined. In the illustration at ‘b', the assessee has determined the assessable value taking transaction value as Rs 10,000, because for the said transaction he gets Rs 10,000 from the customer inclusive of a notional amount of Rs 384.6 as VAT. However this VAT is not paid to the State.
Thus in both the cases the assessee has received Rs 10,000 for the transactions. This scheme implies that the VAT element is only notional as far as the manufacturer is concerned and is neither paid nor payable to the Government. The question for consideration is what would be the price inclusive of excise duty from which transaction value shall be determined for the purpose of discharging excise duty.
In terms of Section 4, ‘transaction value' is defined as the price actually paid or payable for the goods, .........but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods. Further, Circular F. No. 354/81/200-TRU dated 30.6.2000 in Paras Nos. 10 and 11 explains that only those taxes which are actually paid or are payable to the concerned governments are deductible for determination of Assessable value. Those amounts which are neither paid nor payable at a later date cannot be deducted while arriving at the assessable value.
In view of above, Board clarifies that the VAT element indicated as price adjustment in the invoices in terms of SRO 91 and remitted by the State is not to be deducted for determining the assessable value.
Circular No. Dated: December 22, 2008