Guj-VAT Notifications–Reversal of ITC on purchases used for inter-state trade

September 29, 2014
1 min read

[By Shaleen Shah (Partner), VNCA]

We have informed you earlier (Guj-VAT Notification: Disallowance of ITC) that under Gujarat VAT laws, Input Tax Credit (ITC) is to be reversed by 2% on taxable turnover of Purchases when –

(a)  the goods are sold / resold in the course of inter-state trade and commerce;

(b)  the goods are used as input including raw material in the manufacture of goods which are sold in the course of inter-state trade and commerce.

Now the state government has amended the provisions for such reversal of ITC vide Notification dtd. 23-Sep-2014.  With effect from 1-Oct-2014, the reversal of ITC will have to be done @ 1%.  In the case of petroleum products including natural gas, the rate of reversal of ITC will be @ 2%.

This aforesaid disallowance of ITC shall not be applicable to-

  • precious metals, jewellery, spices, etc. mentioned in Entry 13 of Sch-II;
  • cotton & cotton waste covered in Entry 24 of Sch-II;
  • certain food items & spices stated in Entry 48(i) of Sch-II;
  • oilseed covered in Entry 54 of Sch-II;
  • beedi leaves covered in Entry 76 of Sch-II.

No Input Tax Credit will be available on naphtha, natural & associated gas & LSHS used in fertilizer industries for manufacturing of fertilizers of any kind.

Further, in a separate Notification dtd.23-Sep-2014, the State Government has withdrawn the exemption hitherto available to sale of LPG for domestic use.

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