Deferred tax under Haryana VAT must be computed on gross sales tax without first deducting input tax credit.

Under the Haryana VAT deferment scheme, an industrial unit opting to pay 50% of deferred tax upfront must compute that deferred tax on the gross tax liability on sales of manufactured goods, without first reducing input tax credit on raw materials. The statutory scheme in Section 61(2)(d)(iii), read with Rule 69 and the illustration in Rule 28C(5), treats the input tax component as part of the upfront payment rather than a deduction from deferred tax. The earlier binding view was followed, so the issue was decided against the Revenue and in favour of the assessee.

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Issues: Whether, for the purpose of payment of 50% of deferred tax upfront under the Haryana Value Added Tax regime, the deferred tax was to be computed after deducting input tax paid on goods used in manufacture.

Analysis: The appeal was covered by the earlier decision in which the relevant provisions were construed to mean that the option to pay half of the deferred tax upfront requires payment of 50% of the deferred tax itself, computed on the basis of tax on sales of manufactured goods without first reducing input tax credit. The statutory scheme of tax deferment under Section 61(2)(d)(iii) of the Haryana Value Added Tax Act, 2003, read with Rule 69 of the Haryana Value Added Tax Rules, 2003, and the illustration in Rule 28C(5), supported the view that input tax paid on raw materials is counted towards the upfront payment and not deducted while determining deferred tax.

Conclusion: The deferred tax is to be calculated without deducting input tax, and the amount of input tax paid is to be counted towards payment of 50% of the deferred tax upfront; the issue is decided against the Revenue and in favour of the assessee.

Final Conclusion: The substantial questions of law were answered in line with the prior binding view, and the revenue appeal failed.

Ratio Decidendi: Under the tax deferment scheme, where an industrial unit opts to pay half of the deferred tax upfront along with returns, deferred tax is computed on the gross tax liability on sales of manufactured goods without reducing input tax credit, and the input tax component is treated as part of the upfront payment.

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