Sales Tax Instructions

Sales Tax Instructions, 2009
(vii)
The facility to get registered manufacturing units acquired on lease has led to
proliferation of business of flying invoices. In most of such cases, power looms
industry remains continuously engaged in manufacturing of fabrics to be consumed
locally without payment of sales tax. However, to get the input tax adjustment on
electricity bills, spare parts, lubricants and sizing material etc. the loom shed is
leased out to registered person only in paper who issues flying invoices of fabric of
claiming refund against zero-rate.
F. RESULT OF MEASURES TAKEN SO FAR
(i)
(ii)
Verification of Invoices
The verification process of input tax invoices is very lengthy, unorganized and fruitless.
Perhaps, no case has been detected through this mechanism in the country. The system
has failed to deter sale and purchase of flying invoices.
Requirement of section 73 of the Sales Tax Act.
The provisions of section 73 of the Sales Tax Act, 1990 has played no role in eliminating
the flying invoices as supplier & buyers have developed mutual understanding before
the amount mentioned in instrument of payment which is also reflected in bank accounts
statement is paid back in cash to the buyer. It has been observed that instruments of
payment are found issued even in cases where suppliers were subsequently found fake
and non-existent.
G. PROPOSED REMEDIAL MEASURES TO DISCOURAGE FLYING INVOICES
(i)
(ii)
(iii)
(iv)
Registration of new units may be made subject to prior verification of notified
premises /installation. Strict and comprehensive rules may be framed for registration
of units on lease basis making lease agreement irrecoverable for a period of two
year and also to make the owner liable under the Act for recovery of outstanding tax
of lessee if any. The NTN of lessee may also be made mandatory for registration and
the turnover may be intimated to income tax department for annual assessment.
The registered person of each commodity where phenomenon of flying invoices is
alarming may be required to furnish Special return under section 27 of the Sales Tax
Act, 1990. This return is to be filed on last day of the tax period or on first day of the
following month showing detail of sales and purchases. Payment of sales tax may,
however, continue to be made on 15 th day of the following month. This measure may
not eliminate but will definitely reduce the number of flying invoices.
Similarly, the registered persons dealing with flying invoices prone commodities e.g.
yarn, fabrics, machinery parts, furnace oil etc, may be required under the law to
issue three copies of the input tax invoice for each taxable supply. The original copy
of the invoice be provided to the buyer the second copy should accompany the
consignment and an officer of the department not below the rank Assistant Collector
may be authorized to check the consignment on its way to destination, when so
warranted. Third copy to be retained by supplier for his record.
Transportation documents may be made part of the sales tax record prescribed
under section 22 of the Act. This record may be co-related with sale / purchase
record at the time of audit or in case of suspension in solitary cases.