Input Credit on Branch Transfers

[Ramchander Rao Proddatoori]

Dear Sir,

Dealer X is Purchasing Goods in the State of Tamilnadu and paying VAT @ 5% on his purchases. He is using the goods for manufacturing purposes. He is selling finished goods i.e. Taxable Sales in Tamilnadu and also sending some goods to his branches outside Tamilnadu.

His Branch Transfers are supported by Form F issued by the Branch outside Tamilnadu.

Whether the dealer is eligible for input Tax Credit.

AI Summary

Dealer X can claim input tax credit under TNVAT Act but must reverse credit on out-of-state stock transfers. Dealer X, purchasing goods in Tamilnadu and paying 5% VAT, uses these goods for manufacturing and sells finished products in Tamilnadu while also transferring some goods to branches outside the state. The query concerns eligibility for input tax credit on these branch transfers. Responses indicate that Dealer X can avail input tax credit but must reverse a proportionate amount on stock transfers according to the TNVAT Act. Additionally, there is a provision for partial rebating, meaning only a portion of the credit may be availed, depending on the rebate percentage.