VAT on cess

[Kishor Deshpande]

While purchasing petrol or diesel from the oil companies, the oil compnies are charging cess on the value of petrol or diesel after charing Value added tax on the value of petrol or diesel. That is they are not charging valued added tax on the amount of cess. Then when a petrol pump dealer sell petrol or diesel then he is simply recovering the value of cess in his gross value of cess. But VAT department is demanding the VAT on cess at the time of sale effected by the petrol pump dealer. Since the dealer is liable to pay VAT on his commission i.e. value addition. In addition to this the dealer is not fixing his sale price. So,what should be position in this situation.

[Rama Krishana]

Normally, the amount charged by the seller from the purchaser would part of gross value. Therefore, once cess is charged by the selling companies from the dealers, the same should be included into the value of petrol or diesel sold by the dealer for the purpose of VAT. On the other hand, the retail sale price of petrol or diesel are being determined after taking in account the applicable rate of VAT. The state government also determine the rate of VAT of petrol or diesel after considering various factors. Therefore, if you think that cess should not be included in to the part of sales price of dealer, you should get those working and details to argue your case before the VAT officer.

AI Summary

VAT on cess applies when cess is part of the sale value, increasing dealer taxable value and liability. Any amount charged by a seller that is recovered by a dealer as part of the gross sale price should be included in the dealer's taxable value for VAT; cess collected and passed through by dealers therefore forms part of taxable value on resale, and a dealer disputing that treatment should compile detailed workings and evidence to present to the VAT officer.