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Section 8, Explanation Required
04-05-2008, 02:42 AM,
Section 8, Explanation Required
Sorry for producing tax topic in accounting section as i feared posting in the relevant section could delay the response.

Can anyone explain Section 8 (a).

[<font color="blue">i]Section

8. Tax credit not allowed.--

(1) Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on --

(a) the goods used or to be used for any purpose other than ("for the manufacture or production of taxable goods or" omitted by Finance Act, 2007) for taxable supplies made or to be made by him; [/i]</font id="blue">

Does omission of "FOR THE MANUFACTURE OR PRODUCTION", means any expense other than manufacturing and production such as courier, hotel stay, general repairs all can be used to claim input tax.

Kindly explain.
04-08-2008, 08:07 PM,

You should have made it clear in your post that in which Law's context you are raising this query i.e. Sales Tax Act 1990.

Input tax on goods used or to be used for taxable supplies made or to be made by a registered person is admissible under the Sales Tax Act, 1990.

Section 8 interalia was used to impose restrictions on input tax to be claimed by the registered persons. So many SROs had been issued in past for this purpose providing lists of the items on which input tax was not allowed under section 8. Further, the sals tax department had been rejcting claims in past on certain items including those which you have mentioned in your post. Sales tax on utility bills pertaining to administrative blocks was not allowed. There are so many other examples.

A specific reference for entitlement of a registered person to reclaim or deduct input tax paid on goods used "for the manufacture or production of taxable goods" was also included in section 8 which has been omitted through Finance Act, 2007.

The department in the past had taken very narrow view on allowing the input tax because of this reference and contended that input tax on only those goods was allowable which were directly related to manufacture or production of taxable goods.

This amendment would mitigate the chances of that restrictive application of law.

However, in my view this would again create confusions and notifications/circulars providing guidance may be required in upcoming days as the department has always remained reluctant in allowing such inputs and habits have been developed which will take time ingetting corrected.

Best regards,


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