Whether Purchase liable for Purchase tax if goods purchased deemed tax paid in the hands of Seller

[Guest]

Levy of Sale Tax u/s 9 on cotton specified in Schedule II (Entry no 27) @ 5% and such tax shall be levied on the taxable turnover of a selling dealer.

Cotton is notified goods, (Noti. No. 19 dt. 3/8/09) procured for subsequently sale or consumption by purchasing dealer. Purchasing dealer issue TDS certificate u/s 26-A(1) to selling dealer after deducting VAT charged by selling dealer on invoice to discharge Sales Tax Liability of selling Registered Dealer.

The turnover of sale of goods deemed Tax paid Rule 45-A(9) on producing TDS certificate received from purchasing dealer at the time of assessment of selling registered dealer.

U/s 10 Every dealer who in the course of his business purchases any goods from a registered dealer in the circumstance in which no tax under section 9 is payable by the selling registered dealer on the sale price of such goods.

Whether Purchase liable for Purchase tax u/s 10 in the hands of purchasing dealer ?

[Rama Krishana]

As I tried to understand the provisions of Madhya Pradesh VAT Act as enumerated in the query, I am of the opinion that nothing is required to be read in isolation.

Sales tax which is required to be paid by the selling dealer is required to be paid by the purchasing dealer by way of TDS. Once the purchasing dealer deduct TDS and make the payment to the government as per the Section 26-A(1) read with Rule 45A-9, selling dealer is free from its tax liability.

As long as the question of purchase tax is concerned in my view the provisions of Section 9 read with Section 10 are clear and I find no ambiguity therein. The goods are tax paid, either directory or indirectly and hence, no separate purchase tax would be levied purchase of such goods where TDS has been deducted and paid.

AI Summary

TDS on purchase discharges the seller's VAT liability and prevents a separate purchase tax liability for the buyer. When a purchasing dealer deducts tax at source, issues the TDS certificate and remits the deducted tax in accordance with the statutory provisions and rules, the selling dealer's tax liability is discharged and the sale turnover is treated as tax paid on assessment; accordingly, no separate purchase tax is levied on the purchasing dealer for those goods.