Why Purchase Tax Paid if Purchase of Unregistered Deler

[Mohd. Owais]

If i have ITC and Sale Inter State 2% then Why Deposit Purchase Tax on Purchase unregistered deler ???

[Ganeshan Kalyani]

ITC is different than the purchase tax. ITC can be adjusted against output tax whereas purchase tax is not on output on your end hence it is not ITC but however after paying purchase tax you can certainly tax the credit.

[YAGAY andSUN]

In the VAT regime the principle of purchase is adopted from the era of Sales Tax. Normally, purchase tax comes into play when goods are purchased from a dealer who is not registered with the VAT Authorities. To continue the chain of Value Addition, purchase tax is being levied by the State Government. This purchase tax is also available as Input Tax Credit if goods are disposed off with payment of VAT/CST as the case may be but not available as ITC if the goods are stock transferred or disposed off otherwise.

AI Summary

Purchase tax distinct from input tax credit; recoverable only when goods are later sold with VAT or CST payment. Purchase tax is a distinct levy on purchases from unregistered dealers, imposed to maintain the value addition chain and not directly adjustable against output VAT/CST as ITC. Purchase tax paid may be recovered as input tax credit only when the goods are subsequently sold with VAT or CST payment; it is not available as ITC for stock transfers or disposals that do not attract VAT/CST.