Input Tax Credit
The person who is registered in
VAT can claim credit of VAT paid while purchasing the Goods or Services through
imports or from any other person registered on VAT. This credit is called Input
Tax Credit (ITC).
Input Tax Credit (ITC) is
deducted from the VAT Liability which arises on Sales of Goods or Services
(Output Tax). The balance amount is only paid to the government.
What is eligible for Input
Tax Credit?
Ans: All purchase in relation to
business such as Purchase/ Import of Raw Materials, Packing Materials,
Machinery and Equipment, Office Equipment, Telephone Bill, Delivery Van, Diesel
fuel and other expenses in connection with the business.
Such Credit can be claimed up to
one year of Invoice Date. Tax invoice is the basis of claiming input credit of
VAT. If the tax invoice is lost, credit can be claimed on the basis of verified
true copy of the invoice.
What is not eligible for
Input Tax Credit?
Ans: Soft Drinks/ Hard Drinks,
Alcohol, Beer, Petrol, Entertainment Expenses. Such goods and services are
eligible for input credit if those are the main business of the person.
On purchase of
Automobiles(Three or Four wheeler) used for both personal and business use,
only 40% credit can be claimed.
If the automobiles is used for
business only(e.g. delivery van) 100% of credit can be claimed. If it for
personal use only, no credit is allowed.
What is both Taxable and
Non-Taxable goods are transacted?
If any person deals in both
Taxable and Tax Free goods, then sales and purchase of taxable and non-taxable
goods should be segregated and should be recorded separately.
If it is not possible to
segregate the Taxable and Non-Taxable items, then credit can be availed in the
ratio of sales.
Input Credit on goods
damaged by theft/fire etc.
If goods are damaged due to
the reason of theft, accident or fire an application is to be submitted to
income tax office within 30 days to claim credit on such goods. After examining
the case, the tax office may allow credit.
If manufacturing date is
expired for any goods and are not in saleable condition, debit note can be
issued for goods return. If goods cannot be returned, then within 30 days an
application is to be made to the Inland Revenue Department with all the
supporting documents.
In case, the goods are
insured, credit is not allowed up to the amount of compensation by the
insurance company.
If a business only
registered in PAN goes for VAT registration, What will happen for the purchases
already made and VAT paid.
In such case, an application
is made within 15 to the tax officer for Credit of the stock present on the
registration date. Format of application is as per Schedule 16 of VAT Rules. All
the invoices relating to the closing stock should be enclosed with the
application for verification.
After appropriate inquiry, the
Tax Officer will decide on the case and will grant Input Credit.
Input Credit in case of
Reverse VAT
If the service is obtained
from any foreign party, Reverse VAT is applicable i.e. person making payment to
the foreign person is responsible for VAT payment to the government.
The amount of VAT paid on
reverse charge can be claimed by the person on the basis of payment (deposit)
voucher.
Thanks for sharing this guideline!
ReplyDeleteSmall Business Tax
can can pan registered company can claim ITC on vat in sale of goods. the company imports good and sell in the country.
ReplyDeleteNO
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ReplyDeleteSuppose XYZ Co. Pvt. Ltd. is registered as operating and providing hospitality, swimming and other recreation activities.
ReplyDeleteAnd such company incurred labor expenses on development of such structural buildings, would such labor expenses is subject to reverse vat ?
Construction of Businesses Structure: According to sec 8(3) any person (registered or not under VAT) in Nepal engaged in constructing of commercial buildings, apartments, shopping malls or construction of similar nature of value more than NPR. 5 millions performs such works/ Purchases from the person who is not registered under VAT, need to pay VAT on the construction cost if the purchases is not made through the person who is registered under VAT. Whether this provision applicable ?
Deletecan Input tax credit be availed on self supply of trading goods for business purposes or it must be reversed ?
ReplyDeletesir provide me the act and section plz
ReplyDeleteThanks for sharing
ReplyDelete