Vat Input Credit on Safety oriented Goods

[Asked by Guest]

Dear Experts,

I have some ambiguity regarding to takes the Vat Input on Safety oriented items. Can we takes Vat input on Safety oriented Goods (like:- refilling of Fire Extinguisher, Safety cloths etc.) using in Pharmacy Company ?

Kindly suggest with your best judgment..

Thanks & Regard

Vikram

[PARTHASARATHY V]

You can't take VAT credit for the Safety Equipment's or its accessories or refills. It is not falling under the category of the Input or Capital Goods.

If credit taken you will end up with paying penalty with interest, it is advisable to expenditure the same.

[Ganeshan Kalyani]

Yes I agree with Mr Parthasarathy view

All right sir and thanks for this. but if talk to other side then all of these goods are mandatory to do the production and If we do the production without it, then it is fully against all compliance regarding to Pharma company. I had this point in my mind....

Regard

Vikram.

[PARTHASARATHY V]

Dear Vikram,

As per the VAT act we have to fulfil certain conditions to take VAT Credit (Bellow is extract of TNVAT ACT 19(2) You can refer your respective state.

Input tax credit shall be allowed for he purchase of goods made within the state from a registered dealer and which are for the purpose of :-

(i) re-sale by him within the state ; or

(ii) use as input in manufacturing process of goods in the state; or

(iii) use as containers, labels and other materials for packing of goods in the State; or

(iv) Use as Capital goods in the manufacture of taxable goods.

(v) Sale in the course of inter-State trade or commerce falling under sub section (1) and (2) of section 8 of the CST Act 1956.

(vi) Agency transactions by the principal within the state in the manner as may be prescribed.

If your transaction fall in the any of the above category you can take credit. Safety is extra or additional precautionary measure to prevent form fire or any other unfrozen act. This activity is not forming part of the manufacturing activity and not eligible for Input VAT Credit.

Hope the above explanation may helpful to you.

Thank you Sir,

[YAGAY and SUN]

There are plethora of judgments which allowed the ITC on safety equipment. In our view you can avail the ITC on such goods.

Dear Sir,

we are purchasing a lot of consumable goods (e.g. :- disposable Cloths, socks etc) and these types of goods are creating some confusion regarding for Vat input..

Kindly revert as soon..

[Ganeshan Kalyani]

It is better to analysis the VAT input provision reproduced by Mr. Parthasarthy.

AI Summary

Input tax credit on safety equipment disputed; statutory manufacturing use test typically denies credit, though some judgments permit it.
Whether Input Tax Credit is recoverable on safety goods used in pharmaceuticals depends on statutory ITC eligibility: credit is allowed only for purchases for resale, use as input in manufacturing, packing materials, capital goods in manufacture, specified inter state sales, or prescribed agency transactions. Safety equipment and related consumables are treated as precautionary/ancillary rather than part of manufacturing and thus not eligible for ITC under this framework, though some judgments have permitted credit leading to conflicting practice.