While
implementing VAT, all States had provided for disallowance
of Input Tax Credit of 4% with reference to goods (either
traded or manufactured) stock transferred to other States.
The rationale was that had the goods been dispatched
by way of inter State sale to dealers, the Government
would have realised CST at 4%.
With
the reduction of CST rate of tax to 3% with effect from
01/04/2007, it was expected that all States would reduce
the disallowance of Input Tax Credit with reference
to Stock transfer to 3%.
Southern
States neighboring Andhra Pradesh, viz Tamil Nadu, Karnataka,
Kerala and Pondicherry have amended/provided in the
respective VAT Acts that Input Tax Credit in excess
of 3% would be eligible on Stock Transfer, with effect
from 01/04/2007.
Recently
by Notification No.VAT-1507/C.R.17/Taxation-1 dated
31/10/2007, Maharashtra has also reduced the disallowance
to 3% retrospectively with effect from 01/04/2007.
Section
13(6) of the Andhra Pradesh provides that a dealer is
eligible for input tax credit in excess of 4% when any
goods on which Input Tax Credit has been availed is
dispatched by way of stock transfer outside of Andhra
Pradesh.
To
achieve economies of scale most manufacturers have set
up factories in Andhra Pradesh to cater to the national
market. The entire goods manufactured cannot be sold
in Andhra Pradesh and is required to be stock transferred
to branches in other States.
To
help the industries in Andhra Pradesh remain competitive,
it is imperative that Section 11(6) of the Andhra Pradesh
VAT Act, 2005 is amended retrospectively with effect
from 01/04/2007 allowing input tax credit in excess
of 3% on Stock Transfer.
Since
the CST rate of tax on sale to registered dealers is
proposed to be phased out gradually, it is ideal that
Section 11(6) of the Andhra Pradesh VAT Act, 2005 is
amended permitting input tax credit with reference to
stock transfer in excess of the rate specified in Section
8(1) of the CST Act, 1956.
16/11/2007
