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CHAPTER II INCIDENCE AND LEVY OF TAX G. VAT ACT

CHAPTER II

 

 INCIDENCE AND LEVY OF TAX

 


   
 Incidence of tax.

   
(1) Subject to the provisions of this Act, every dealer,-
(i) whose total turnover during the year immediately preceding the appointed day exceeded rupees five lakhs and whose taxable
turnover exceeded rupees ten thousand in a year (the aforesaid amounts of total turnover and taxable turnover are hereinafter referred
to as “thresholds of turnover”), or 
(ii) who was registered under the earlier law or under the Central Act as on the appointed day, or
(iii) whose total turnover and taxable turnover in any year first exceed the thresholds of turnover, or
(iv) who is registered or liable to be registered as a dealer under this Act or under the Central Act at any time after the appointed day shall be liable to pay tax in accordance with the provisions of this Act.
(2) Notwithstanding anything contained in this section, a casual dealer or an auctioneer shall be liable to be registered if his taxable turnover of sales exceeds ten thousand rupees and he shall be liable to pay tax in accordance
with the provisions of this Act. 
(3) The dealer shall be liable to pay tax,--
(a) in case of clauses (i) and (ii) of sub-section (1), with effect from the appointed day;
(b) in case of clause (iii) of sub-section (1), with immediate effect when his turnover calculated from the commencement of the year first
exceeds the thresholds of turnover;
(c) in case of clause (iv) of sub-section (1), with immediate effect when he becomes so liable or the date of registration under this Act, whichever is earlier:
Provided that the dealer shall not be liable to pay tax in respect of thresholds of turnover as takes place during the period prior to the relevant date of effect under this sub-section.
(4) Every dealer who has become liable to pay tax under this Act shall continue to be so liable until the expiry of one year during which his turnover has remained below the thresholds of turnover and such further period after the date of such expiry as may be prescribed; and on the expiry of such further period his liability to pay tax shall cease:
Provided that any dealer whose liability to pay tax under this Act ceases or his total turnover and taxable turnover during the year remains
below the thresholds of turnover, may apply for the cancellation of his certificate of registration; and on such cancellation, his liability to pay tax shall Incidence of tax. cease and such dealer shall remain liable to pay tax till his certificate of registration is cancelled.
(5) Every dealer whose liability to pay tax under this Act has ceased under sub-section (4) or whose certificate of registration has been cancelled, shall, if his total turnover of sales or purchases calculated from the commencement of any year (including the year in which the registration has been cancelled) again exceeds the thresholds of turnover, on any day within such year, be liable to pay tax with effect from the date immediately following the day on which his total turnover again exceeds thresholds of turnover of sales effected by him after that date.
(6) Where by an order passed under this Act, it is found that any person registered as a dealer ought not to have been so registered, then,
notwithstanding anything contained in this Act, such person shall be liable to pay tax for the period commencing with the date of his registration and ending with the date of such order, as if he were a dealer.
 
 
 
Certain sales and purchases not liable to tax.
 
4. Nothing contained in this Act or the rules made thereunder shall be deemed to impose or authorise the imposition of tax on any sale or purchase of any goods where such sale or purchase takes place-
(a) in the course of inter-State trade or commerce; or
(b) outside the State; or
(c) in the course of the import of goods into or export of goods out of the territory of India, and the provisions of this Act and the rules thereunder shall be construed accordingly.
Explanation.- Section 3, 4 and 5 of the Central Act shall apply for determining whether or not a particular sale or purchase has taken place in the manner indicated in clause (a), (b) or (c).
 
 
Exemptions.
 
5. (1) The goods specified in the Schedule I shall be exempt from tax subject to the conditions and exceptions set out therein.
(2) Subject to such conditions as it may impose, the State Government may, if it considers necessary so to do in the public interest, by
notification in the official gazette,
(a) exempt any class of sales or purchases from payment of the whole of the tax payable under the provisions of this Act.
(b) grant exemption from payment of whole of tax in respect of any class of sales or purchases for the purpose of promoting the scheme of Special Economic Zones or promoting exports.
(3) Every notification issued under sub-section (2) shall be laid for not less than thirty days before the State Legislature as soon as possible after it is issued and shall be subject to rescission by the State Legislature or to such modifications as the State Legislature may make, during the session in which it is so laid or session immediately following. Any rescission or modification so made by the State Legislature shall be published in the Official Gazette, and shall thereupon take effect.
 
 
 
Taxes payable by a dealer.
 
6. Subject to the other provisions of this Act, every dealer, who is liable to pay tax under this Act, shall pay the tax leviable in accordance with the provisions of this Act.
 
 
 
Levy of tax on turnover of sales and rates of tax.
 
7. (1) Subject to the provisions of this Act, there shall be levied a tax on the turnover of sales of goods specified in Schedule II at the rate set out against each of them in the said Schedule.
(2) Subject to such conditions as it may impose, the State Government may, if it considers necessary so to do in the public interest, by
notification in the Official Gazette, add to or omit from, or otherwise amend or modify the Schedule, prospectively or retrospectively, or transpose any entry or part of any entry from one Schedule to the other Schedule or reduce the rate of tax payable in respect of any goods and thereupon the Schedule shall be deemed to have been amended accordingly. 
(3) Every notification issued under sub-section (2) shall be laid for not less than thirty days before the State Legislature as soon as possible after it is issued and shall be subject to rescission by the State Legislature or to such modifications as the State Legislature may make, during the session in which it is so laid or session immediately following. Any rescission or modification so made by the State Legislature shall be published in the Official Gazette, and shall thereupon take effect.
 
 
 
Adjustments in tax.
 
8. (1) The provisions of sub-section (2) shall apply where, in relation to the sales of taxable goods by any registered dealer-
(a) that sale has been cancelled; or
(b) the consideration previously agreed upon for that sale has been altered by agreement with the recipient, whether due to the offer of a discount or for any other reason; or 
(c) the goods or part of the goods sold have been returned to the seller, and as a result of the occurrence of any one or more of the abovementioned events of such sales, the seller has-
(i) provided a tax invoice in relation to that sale and the amount shown therein as tax charged on that sale is incorrect in relation to the amount properly chargeable on that sale; or 
(ii) furnished a return in relation to the period in respect of which tax on that sale is attributable, and has accounted for an incorrect amount of tax on that sale in relation to the amount properly chargeable on that sale.
(2) Where a seller has accounted for either in the tax invoice or in the return an incorrect amount of tax as contemplated in sub-section (1), such seller shall make an adjustment in calculating the tax payable by him in the return for the tax period during which it has become apparent that the tax is incorrect. Such adjustment shall be made in the following manner, namely:-
(a) if the amount of tax chargeable in relation to that sale exceeds the amount of tax actually accounted for by the seller, the amount of that
excess shall be deemed to be tax charged by such seller in relation to Taxes payable by a dealer.
a taxable sale attributable to the tax period in which the adjustment is to be made, and shall not be attributable to any prior tax period; or
(b) the amount of tax actually accounted for exceeds the amount of tax properly chargeable in relation to that sale, such seller shall reduce
the amount of tax attributable to the said tax period in terms of section 7 by that excess amount of tax:
Provided that the reduction in the amount of tax under clause
(b) shall not be made-
(a) where the excess tax has been borne by the purchaser of goods, or
(b) if the relevant event as described in sub-section (1) has occurred subsequent to the period of six months of the sales made by the dealer.
 
 
 
Levy of purchase tax.
 
9. (1) Where a dealer who is liable to pay tax under this Act purchases any taxable goods from a person who is not a registered dealer, then there shall be levied on such dealer a purchase tax on the turnover of such purchases at the rate set out against each of such goods in Schedule II of this Act.
(2) Where a registered dealer purchases sugarcane from a person who is not a registered dealer, for the purpose of use thereof in the
manufacture of sugar or khandsari, there shall be levied a purchase tax on the purchase of such sugarcane at the rate set out therefor in Schedule II of this Act.
(3) Where any person or dealer has purchased any taxable goods under a certificate or declaration given by him under any provision of this Act or earlier law, rule or notification, and the conditions, recitals or undertakings of such certificate or declaration are not complied with, then such person or dealer shall be liable to pay purchase tax on the turnover of such purchases at the rate set out against each of such goods in Schedule II of this Act or at the applicable rate of tax under the earlier law, whichever is higher.
 
 
 
Rate of tax on packing materials.
 
10. Notwithstanding anything contained in this Act and contract of sale, where goods packed in any materials are sold, the materials in which the goods are so packed shall be deemed to have been sold or purchased alongwith the goods and the tax shall be leviable on such sales or purchases of the materials at the rate of tax, if any, as applicable to the sales or as the case may be, purchase of the goods themselves.
 
 
Tax credit.
 
11. (1)(a) A registered dealer who has purchased the taxable goods (hereinafter referred to as the “purchasing dealer”) shall be entitled to claim tax credit equal to the amount of,-
(i) tax collected from him, by a registered dealer who has sold such goods to him or the tax payable by him to a registered dealer who has sold such goods to him during the tax period, or 
(ii) tax paid by him during the tax period under sub-section (1) or (2) of section 9.
(b)The tax credit to be so claimed under this sub-section shall be subject to the provisions of sub-sections (2) to (12); and the tax credit shall be calculated in such manner as may be prescribed.
(2) The registered dealer who intends to claim the tax credit shall maintain the register and the books of accounts in such manner as may be prescribed.
(3)(a) Subject to the provisions of this section, tax credit to be claimed under sub-section (1) shall be allowed to a purchasing dealer on his purchase of taxable goods made in the State, which are intended for the purpose of-
(i) sale or re-sale by him in the State;
(ii) sale in the course of inter-State trade and commerce;
(iii) branch transfer or consignment of taxable goods to other States (subject to the provision of Sub-clause (b) below);
(iv) sales in the course of export out of the territory of India;
(v) ales to export oriented units of the units in Special Economic Zoners for sale in the in the course of export out of the territory of India;
(vi) use as raw material in the manufacture of taxable goods intended for (i) to (v) above or in the packing of the goods so manufactured.
Provided that if purchases are used partially for the purposes specified in this sub-section, the tax credit shall be allowed proportionate to the extent they are used for the purposes specified in this sub-section”.
(b) Notwithstanding anything contained in this section, the amount of tax credit in respect of a dealer shall be reduced by the amount of tax
calculated at the rate of four per cent. on the turnover of purchases-
(i) of taxable goods consigned or dispatched for branch transfer or to his agent outside the State, or
(ii) of goods taxable which are used as raw materials in the manufacture, or in the packing of goods which are dispatched outside the State in the course of branch transfer or consignment or to his agent outside the State.
(4) The tax credit shall not be claimed by the purchasing dealer until the tax period in which he receives from a registered dealer from whom he has purchased taxable goods, a tax invoice (in original) Containing Particulars as may be prescribed under Sub-section (1) of Section 60 evidencing the amount of tax.
(5) Notwithstanding anything contained in this Act, tax credit shall not be allowed for purchases-
(a) made from any person other than a registered dealer under this Act;
(b) made from a dealer who is not liable to pay tax under this Act;
(c) made from a registered dealer who has been permitted under section 14 to pay lump sum amount of tax in lieu of tax.;
(d) made prior to the relevant date of liability to pay tax as provided in sub-section (3) of section 3;
(e) made in the course of inter-State trade and commerce;
(f) of the goods which are disposed of otherwise than in sale, resale or manufacture;
(g) of the goods specified in the Schedule I or the goods exempt from whole of tax by a notification under sub-section (2) of section 5;
(h) of the goods which are used in manufacture of goods specified in Schedule I or in the packing of goods so manufactured;
(i) of the goods which are in the nature of capital goods as defined in clause (5) of section 2 and which are meant for use as capital goods in the manufacture;
(j) of vehicles of any type and its equipment, accessories or spareparts (except when purchasing dealer is engaged in the business of sales of such goods)
(k) property or goods not connected with the business of the dealer;
(l) of the goods which are used as fuel in generation of electrical energy meant for captive use or otherwise;
(m) of the goods which are used as fuel in motor vehicles;
(n) of the goods which remain as unsold stock at the time of closure of business;
(o) where original invoice does not contain the details of tax charged separately by the selling dealer from whom purchasing dealer has purchased the goods;
(p) where original tax invoice is not available with purchasing dealer or there is evidence that the same has not been issued by the selling
dealer from whom the goods are purported to have been purchased; 
Notwithstanding anything contained in clause (a) or (b) in this sub-section and subject to conditions as may be prescribed, a registered dealer shall be allowed to claim tax credit in respect of purchase tax paid by him under subsection (1) or (2) of section 9.
(6) The State Government may, by notification in the Official Gazette, specify any goods or the class of dealers that shall not be entitled to
whole or partial tax credit.
(7) Where a registered dealer without entering into a transaction of sale, issues to another registered dealer tax invoice, retail invoice, bill or cash memorandum with the intention to defraud the Government revenue or with the intention that the Government may be defrauded of its revenue, the Commissioner may, after making such inquiry as he thinks fit and giving a reasonable opportunity of being heard, deny the benefit of tax credit, in respect of such transaction, to such registered dealers issuing or accepting such tax invoice, retail invoice, bill or cash memorandum either prospectively or retrospectively from such date as the Commissioner may, having regard to the circumstances of the case, fix.
(8) If the goods purchased were intended for the purposes specified under sub-section (3) and are subsequently used fully or partly for
purposes other than those specified under the said sub-section or are used fully or partly in the circumstances described in sub-section (5), the tax credit, if availed of, shall be reduced on account of such use, from the tax credit being claimed for the tax period during which such use has taken place; and such reduction shall be done in the manner as may be prescribed.
(9) The registered dealer may claim the amount of net tax credit, which shall be determined in the manner as may be prescribed.
(10) Where any purchaser, being a registered dealer, has been issued with a credit note or debit note in terms of section 61 or if he returns or rejects goods purchased, as a consequence of which the tax credit availed by him in any period in respect of which the purchase of goods relates, becomes either short or excess, he shall compensate such short or excess by adjusting the amount of tax credit allowed to him in respect of the tax period in which the credit note or debit note has been issued or goods are returned, subject to
such conditions as may be prescribed.
(11) A registered dealer shall apply fair and reasonable method to determine, for the purpose of this section, the extent to which the goods are sold, used, consumed or supplied, or intended to be sold, used, consumed or supplied. The Commissioner may, after giving the dealer an opportunity of being heard and for the reasons to be recorded in writing, reject the method adopted by the dealer and calculate the amount of tax credit as he deems fit.
(12) Subject to the exceptions as may be prescribed by the rules, any dealer including the Commission agent shall not be permitted to transfer his tax credit to any other dealer or as the case may be, the principal.
Explanation..—For the purpose of this section the amount of tax credit on any purchase of goods shall not exceed the amount of tax actually paid or payable under this Act in respect of the same goods.
 
 
 
Tax credit for stock on 31st March,2003.
 
12. (1) Within the period as may be prescribed, all the dealers who are deemed to have been registered under section 23 shall furnish in such form and to such authority as may be prescribed, a statement of taxable goods under this Act held in stock on the 31st March, 2003 for which the dealer intends to claim tax credit under this Act.
Explanation.-- For the purpose of this section, “taxable goods held in stock” includes taxable goods in the process of use in the manufacture as on the 31st March, 2003.
(2) A registered dealer who has submitted the statement of taxable goods under sub-section (1) shall not be permitted to make any changes in the details of such statement if such changes result in increase in the tax credit claimed in the statement of taxable goods.
(3) If the goods shown in the statement referred to in sub-section 
(a) were liable to tax under the earlier law, and the purchasing registered dealer had paid the amount of tax to the selling registered dealer under the earlier law or had paid purchase tax under the earlier law, and
(b) are intended to be used for the purposes specified in sub-section (3) of section 11 – 
then the amount of tax so paid by the purchasing dealer on such goods, determined in such manner and subject to the provisions of section 11 as far as they may apply and further subject to such conditions and restrictions and to such extent as may be prescribed, shall be allowed as the tax credit to the dealer referred to in sub-section (1). Such tax credit shall be available as the outstanding credit brought forward for being claimed in such manner as may be prescribed.
(4) Notwithstanding anything contained in this section, no tax credit under this section shall be allowed in respect of those goods,-
(a) which are not taxable under this Act or the earlier law;
(b) which are not included in the statement of taxable goods referred to in sub-section (1);
(c) for which the dealer does not have in his possession sales vouchers issued by a dealer registered under the earlier law, against
the purchases of the said goods or for which purchases tax payable under erlier law has not been paid by the 31st March, 2003;
(d) which are not recorded in the books of accounts of the dealer claiming tax credit under this section; or
(e) which are declared as “prohibited goods” under clause (21) of section 2 of the Gujarat Sales Tax Act, 1969,
(5) Where the amount of tax on the goods purchased is not indicated separately on the sale vouchers, the tax credit under this section shall be calculated in the manner as may be prescribed.
(6) The provisions of section 11 shall apply mutatis-mutandis to the tax credit to be availed of under this section.
(7) If the Commissioner is satisfied that a dealer –
(a) has claimed tax credit for such stock for which he is not entitled for claiming tax credit as per the provisions of section 11 and sub-sections (3) and (4) of section 12, or
(b) has claimed excess tax credit than what he is entitled to under section 11 or under this section the Commissioner may, after giving the dealer an opportunity of being heard direct him to pay a penalty equal to twice the amount of tax credit so claimed.
 
 
 
Net amount of Value Added Tax.
 
13. The net amount of Value Added Tax for a tax period payable shall be determined after the adjustment of tax credit in the manner as may be prescribed.
 
 
 
Option for payment of lumpsum tax in lieu of tax on sales.
 
14.(1) (a) Notwithstanding anything contained in this Act, the Commissioner may, in such circumstances and subject to such conditions as may be prescribed, permit any dealer, who is not engaged in the activity of manufacture and whose total taxable turnover has not exceeded rupees twenty-five lakhs in the previous year, to pay lump sum tax in lieu of the amount of tax payable under section 7 of this Act.
(b) The payment of lump sum tax granted under sub-section (1) shall remain valid so long as the total taxable turnover of the registered dealer does not exceed rupees twenty-five lakhs. In case where total taxable turnover of a registered dealer exceeds rupees twenty-five lakhs during the course of the year, he shall be liable to pay tax under the provisions of this Act from the tax period as may be prescribed for this purpose.
Explanation.--: For the purpose of permission under clause (a) for the year 2003-04 total taxable turnover shall be calculated with reference to the Gujarat Sales Tax Act, 1969.
(2) The State Government may, fix the rate of lump sum tax by notification in the Official Gazette.
(3) A dealer who is permitted under sub-section (1) to pay lump sum tax shall not,-
(a) be entitled to claim tax credit in respect of tax paid by him on his purchases,
(b) charge any tax under this Act in his sales bill or sales invoice in respect of the sales on which lump sum tax is payable; and
(c) issue tax invoice to any dealer who has purchased the goods from him.
(4) A dealer who is permitted under sub-section (1) to pay lump sum tax shall be liable to pay, in addition to the lump sum tax under this section,--
(a) purchase tax leviable under sub- sections (1) and (3) of section 9;
(b) tax at the rate specified under section 7 in respect of sales of goods within the State,-
(i) which are purchased or brought from other State in any manner, or
(ii) which are purchased in the course of import from outside the territories of India, and
Explanation.-- For the removal of doubt, it is clarified that the dealer who has been permitted to opt for composition under this section shall be liable to pay central sales tax as per the provisions of Central Act in respect of sales made by him in the course of inter-State trade and commerce.
 
 
 
Burden of proof.
 
15. The burden of proof shall lie on a dealer who claims that he is not liable to pay tax under this Act in respect of any sale effected by him or is eligible for a tax credit under section 11 and section 12.

 

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