Input Credit on Branch Transfers

[Asked by Guest]

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.

[YAGAY and SUN]

You can avail the Input Tax credit provided you must reverse proportionate ITC on the Stock Transfer as per the provisions of TNVAT Act read with Rules made thereunder.

[Madhukar N Hiregange]

There is a provision for partial rebating which needs to be examined and to the extent of that credit cannot be availed or reversed.

example Normal rate 5 % - PR = 2% then only 3% credit can be availed.

AI Summary

Input tax credit on branch transfers requires proportionate reversal when stock moves interstate despite supporting documentation.
Input tax credit on manufacturing purchases remains available for in-state taxable sales, but credit attributable to stock transferred to out-of-state branches must be reversed proportionately under the TNVAT Act and associated rules; Form F does not automatically permit retention of full credit and a partial rebate mechanism may limit the recoverable credit.