ADVANCE VAT RULING

[Guest]

Dear Sirs,

I am a consignment agent for a Andhra based compnay dealing with ayurvedic products, two years back

I applied for a VAT ruling of 5 % from 14.5%, ( for all ayurvedic medicine and products the vat rate is only 5%)

till date there is no response from the Sales tax department, If the department denies to give VAT ruling of

5 % what will happen, ( we are paying tax @ 5% for the past two years, earlier for 6 years we paid tax @ 14.5%)

(all our product requesting for 5 % tax is having valid AYUSH DEPARTMENT CERTIFICATES)

kindly reply

[Ganeshan Kalyani]

When you product is not specifically covered under VAT schedule entry then it will be considered under residual schedule entry and higher rate of tax is liable to be paid. You have applied to get ruling from Authority for Advance Ruling. But so far you have not received any ruling. At the outset I would like to know whether you had followed up with the department for taking up your case or whether there had been a hearing in this regard. Anyway untill you receive any ruling from the authority you should have collected higher rate and paid it to the exchequer. But at present situation there may happen that in ruling you may get unfavourable order. Then in that case you will have to pay the differential tax along with interest. Thanks.

AI Summary

VAT classification uncertainty can require collection and payment at the higher rate pending an advance ruling decision. The taxpayer sought an advance VAT ruling to classify AYUSH certified ayurvedic products at the lower rate but received no decision; goods not specifically covered by the VAT schedule fall under the residual entry and attract the higher rate. Until a ruling is issued the taxpayer should have collected and paid the higher rate, and if a later ruling is unfavorable the taxpayer may be required to pay the differential tax with interest.