Transitional input tax credit on alleged entry tax was not admissible for motor vehicles held in closing stock.

Transitional input tax credit under Section 88(6)(a) of the Tamil Nadu Value Added Tax Act, 2006 was confined to sales tax paid under the earlier regime on goods held in stock, subject to the prescribed conditions. A purchaser could not claim credit for an alleged entry tax burden said to have been borne on closing stock of motor vehicles, because any such tax element, if present, would have been dealt with at the dealer level under the earlier sales tax structure. Even on an outside-State import scenario, entry tax would fall under the entry tax law, not Section 88(6)(a). Credit was therefore rightly denied.

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Issues: Whether transitional input tax credit in respect of entry tax allegedly borne on closing stock of motor vehicles was admissible under Section 88(6)(a) of the Tamil Nadu Value Added Tax Act, 2006.

Analysis: The claim was based on entry tax said to have been borne on vehicles purchased from a local dealer. The entitlement under Section 88(6)(a) extended only to sales tax paid under the earlier law on goods held in stock, subject to the prescribed conditions. On the facts, the selling dealer had purchased and sold the vehicles within Tamil Nadu and any entry tax element, if at all, would have stood adjusted only at the dealer level against the tax payable under the earlier sales tax regime. Transitional credit could not therefore be claimed by the purchaser on the basis of an entry tax burden allegedly collected by the seller. Even assuming import of vehicles from outside the State, such entry tax would be governed by the entry tax enactment and not by Section 88(6)(a).

Conclusion: The claim for transitional input tax credit on entry tax was not admissible and the denial of credit was upheld.

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