input tax restriction / Works Contract or not
vishwanath
(Querist) 13 January 2009
This query is : Resolved
dear Sir,
one of my clients under karnataka Vat Act are running a lead processing industry where scrap battery is subject to processing and a semi finished product ie lead is got which is sold.
1) My query is i have been claiming input tax credit on scrap batteries @12.5% which is paid by me on purchase. wheras the lead processed is taxed at 4% and thereby i claim refund every month of 8.5%. my question i am doing anything wrong or is there any part of input Tax which i have to restrict or not to be claimed in such cases.
2) My another query is if the said industry undertakes Job work ie, raw materials/scrap battery is supplied by another industry in Tamilnadu and our clients process the same and supply the processed lead (out of the raw materials supplied) back to them. I know it does not amount to sale. but my question is does it amount to works contract.
The requirements of processing other than raw materials are 1) Labour 2) Electricity 3) Chemicals 4)Fuel(charcoal, firewood etc).
Since raw materials is supplied by another industry and as we know labour does not attract sales tax. and further treating fuel and chemicals as consumables. can i remain without paying taxes stating the work as pure labour work/job work
OR does the chemicals and fuel used are deemed to be transfer of property in goods, therefore should i pay taxes, treating it as works contract.
However the chemicals are used to vary the quality of lead ie by adding certain quanties of chemicals, the quality of lead differs ( pure/ average etc)
Note: Only raw material is supplied by Another industry. Fuel and chemicals are to be purchased by us locally.
3) my third query is am i eligible to claim input tax credit (ITC) on fuel and chemicals if the above (query No 2) is a pure labour work.
waiting for your reply sirs,
vishwanath
Guest
(Expert) 04 April 2009
What is consumed in manufacture is not transfered. It is cost for you and you cannot take creidt on purchase of these fuels.
3. No. Check section 11 restrictions on input tax credit.
