Input Tax Credit, VAT + CST

[RAMASWAMY KRISHNA IYER]

Under the state VAT Act, for availing input tax credit (ITC), the sale should be from one registered dealer to another registered dealer.

By virtue of specific explanation in the definition of dealer a financing company selling pledged ornaments is a deemed to be a dealer, hence such a sale is taxable.

In the past RBI permitted self purchase of such pledged ornaments by the financing company themselves. Even this is accepted in the decision of Hon'be Supreme Court in Karnataka Pawn Brokers Association.

Subsequent to the purchase this gold is sold and tax is collected.

In this background kindly advise whether Input tax credit is available to such financing company.

Posts / Replies

[Pradeep Khatri]

Sale to self is no sale. Under VAT regime Input Tax credit would not be available. The Judgment you referred pertains to Sales Tax Regime.