Sales Tax Instructions

Sales Tax Instructions, 2009
SUBJECT:- IMPACT OF SECTIONS 7 & 73 OF THE SALES TAX ACT, 1990
– CLARIFICATIONS REGARDING.
Upon a careful review of various provisions of the Sales Tax Act, 1990, it has
been concluded that there are some inconsistencies within the scheme of the legislation.
While on the one hand the underlying scheme of the Sales Tax Act, 1990 envisages the
indivisible nature of a ―tax period‖ (sections 26, 66, etc.), the changes introduced in
section 7 during 1998 imply otherwise. The said section 7 envisages the possibility of a
tax period during which a tax invoice was issued as being distinct from the tax period in
which input adjustment can be claimed on account of payment made by the holder of the
invoice. Consequently, the taxpayer‘s account keeping becomes somewhat more
complicated as he has to keep track of whether payment was made by him in the same tax
period when tax invoice was issued to him by his supplier. The audit trail also gets
complicated accordingly.
2. It has also been observed that promulgation of section 73 without
recognizing and accommodating the fact that transactions sometimes take place on credit
brought forth the latent complication in the provisions of section 7 as observed at para 1
above.
3. It has, therefore, been decided that the said complications in the sales tax
law would be rectified through necessary amendment in the text of the Sales Tax Act,
1990 at the earliest opportunity (during the budget at the latest). The objectives of
amendments would be:-
(i)
by amending section 7 to enable the claim of adjustment by the holders
of tax invoice in the same period in which the tax invoice is issued
irrespective of whether or not he had made payment of such sales tax to
his supplier; and