RITC on credit notes, gifts,freedistribution,goods lost, destroyed or ...

NATIONAL TAX NEWS AND VIEWSNTNA FORTNIGHTLY VAT/GST LAW REPORTERFirst Journal in Uttar Pradesh and Uttarakhand Providingonline Serviceswww.ntnonline.net or www.upvatonline.comTwo important factors under section 21(14) are –(i)(ii)in the Tax invoice higher amount of tax payable is shown than itis actually payable on sale, andsuch excess tax has been realized by the seller.For contemplating workability of section 21(14), two subsequent transactionshave to be analyzed, to demonstrate that it is leading to double loss for theseller, and the Government is getting the tax twice at two stages without givingthe benefit of ITC to the dealer.First transactionSale value of goods : Rs. 500/-Tax paid/realized shown in the Tax invoice @ 10% : Rs. 50/-Subsequent rebate/gift/free distribution as per rule 21(1)(af)©: National Law Book Publications, B-2, Modern Plaza BuildingAmbedkar Road, Ghaziabad -201001-U.P. Phone Nos. (0120) 4128197,2793852,Email : nlh_ntn@rediffmail.com or ntnalerts@gmail.com: Rs. 100/-Therefore actual sale value charged by seller : Rs. 400/-Actual tax payable on sale value @ 10% : Rs. 40/-Therefore seller is bound to issue credit note of Rs. 10 (50-40) to purchaser asper section 21(14).It is important to note that the credit note is not equivalent to proof of taxdeposited in Government treasury by the seller on account of purchaser, andits set-off cannot be claimed subsequently by the purchaser from its taxliability. It only enables the purchaser to purchase the goods at a priceexcluding the value of the credit note.Second transaction - between the same seller and purchaserSale value : Rs. 100/-Purchase price to be given by the purchaser :10 credit noteRs. 90 cash + Rs.Tax charged by the Government on this second transaction @ 10%would be : Rs. 10/-Here, purchaser has got the benefit of Rs. 10/- only by way of credit note butby adding tax amount he would be liable to pay Rs. 90/- + Rs. 10/- i.e. Rs.100/-. Here, the position of the seller would be that he would be getting onlyRs.90/- for selling the goods worth Rs. 100/-, because he has earlier sold hisgoods of Rs. 500/- for Rs. 400/-. Thus, seller is the ultimate loser and theGovernment is the ultimate gainer, since it is getting the tax twice i.e. Rs. 50/-on first transaction and Rs. 10/- on the second transaction.Therefore, the second transaction shows the compounding loss incurred to theseller because he has given the earlier rebate/gift to the purchaser, due towhich its selling value has fallen below the purchase price.