How to avail input VAT credit?

Here in this article, I have given detail explanation about Gujarat VAT input credit. What is input credit? How to avail credit? How to adjust the same against VAT payment liability? All these information is given regarding input credit under this act.

Input vat credit is very important thing of VAT system because in the VAT system VAT paid at purchase time is available as credit and deducted from payment liability. It avoids cascading effect of tax.

What is Input VAT credit?

Input VAT is tax paid (VAT) at the time of purchase of goods this is very simple term of input VAT. Now what is input VAT credit? Then when the dealer or manufacturer of goods sales the goods he has to collect VAT and it should pay to government but when he had purchased the same goods may be in form of raw material or trading goods and whatever tax (VAT) paid on it is available as input VAT credit and the same will be deducted from VAT payable. Different types of input VAT credit provisions are as follow.

Input VAT on raw material or trading goods

If dealer purchased goods and sale it that means if he is in trading activity then he can claim VAT paid on purchased of that goods as VAT input credit. And manufacturer of goods can claim VAT paid on purchase of raw material as input VAT credit.

Capital goods

Input VAT credit is also available on capital goods in the year of purchase itself but some condition should be fulfilled and that are capital goods should be used in the business if it is plant and machinery then it should be used in production of taxable goods for continuous period of 5 years and if any default is made in this provision then proportionate credit need to reverse.

Credit on fuel

Input VAT credit on fuel is available subject to it is not used in power generation of electricity or in the vehicle, it should be used in the manufacturing process and credit also will be available after deducting 4% tax paid on purchase of such fuel.

Conditions for input VAT credit

Basic condition for input credit is when goods purchased it should intended to sale within the state or outside the state, export, inter branch transfer etc. or it should be used in the manufacturing process as raw material or as packing product.

Where input credit is not available
  • When goods used in manufacture of exempted goods

  • When VAT invoice of purchased goods is not available

  • When in the purchase invoice VAT is not separately shown

  • When goods disposed of without selling

  • Reversal of VAT credit

    If the manufacturer of dealer has sale outside the state then proportionate VAT credit need to revert as per provision. As per reversal rule ratio of taxable turnover made outside the state should derived and proportionate credit by 2% required to reverse. For detail understanding consider following example.
    Company has purchase raw material on which input VAT is available Rs.25000 (VAT rate@4%). and company made sale of goods produced out of that material within the state Rs.75000 and outside the state Rs.25000. In this case in the ratio of 75:25, on 25% VAT credit 2% VAT is required to reverse. That will be 25000*25%=6250, 2% of this consecutive purchase will reverse that will be Rs.3125.

    Adjustment of input credit

    VAT payment liability can be adjusted against input VAT credit available and if the input VAT credit is higher than VAT payable then it can be set off against CST payable and the net amount will be subject to pay to the state government within specified time limit

    Due date of payment of VAT and CST under Gujarat VAT Act and due date of filing return of VAT

  • Due date for payment of VAT is to be made within 22 days from the end of the month or quarter. In case of dealers of Schedule III goods, the tax payment is to be made within 12 days.

  • Due date for filing of return is within 30 day from the end of the month or quarter and for annual return, it is to be filed within 3 months from the end of the year.

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    Guest Author: ashokpalkar30 Jan 2015

    What about a dealer, who is not filed his VAT returns for past 2 years and he is purchasing the VAT paid goods, can he claim the input of past 2 years by filing the VAT returns

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