Chapter III INCIDENCE, LEVY AND CALCULATION OF TAX

1. (1) Save as otherwise provided in the Act, every dealer registered or liable to be registered as a VAT dealer shall be liable to pay tax on every sale of goods in the State at the rates specified in the Schedules.
2. (2) Every dealer who has not opted for registration as a VAT dealer and who is registered or liable to be registered for TOT or whose taxable turnover in a period of twelve
3. (12) consecutive months exceeds Rs.5,00,000/- (Rupees five lakhs only) but does not exceed Rs. 40,00,000/- (Rupees forty lakhs only) shall

pay tax at the rate of one percent (1%) on the taxable turnover in such manner

as may be prescribed.

1. (3) Every VAT dealer shall pay tax on every sale of goods taxable under the Act on the sale price at the rates specified in the Schedules III, IV and V, subject to the provisions of Section 13.
2. (4) Every VAT dealer, who in the course of his business purchases any taxable goods from a person or a dealer not registered as a VAT dealer or from a VAT dealer in circumstances in which no tax is payable by the selling VAT dealer,

shall be liable to pay tax at the rate of four percent (4%) on the purchase price

of such goods, if after such purchase, the goods are:

1. (i) used as inputs for goods which are exempt from tax under the Act; or
2. (ii) used as inputs for goods, which are disposed of otherwise than by way of sale in the State or dispatched outside the State otherwise than by way of sale in the course of inter-State trade and commerce or export out of the territory of India; or
3. (iii) disposed of otherwise than by way of consumption or by way of sale either within the State or in the course of interstate trade or commerce or export out of the territory of India: Provided that in respect of purchases of goods specified in Schedule III, the VAT dealer shall be liable to pay tax at the rate specified in that Schedule;

1. (5) Every dealer shall pay tax on the sale price of goods specified in Schedule VI at the special rates and at the point of levy specified therein;
2. (6) Every casual trader who sells goods within the State and any dealer covered under Explanation III and IV of clause
3. (10) of Section 2 shall pay tax on the sale price of such goods at the rates specified in the respective Schedules.
4. (7) Notwithstanding anything contained in the Act;-

a) Every dealer executing works contracts shall pay tax on the value of goods

at the time of incorporation of such goods in the works executed at the rates applicable to the goods under the Act: Provided that where accounts are not maintained to determine the correct

value of goods at the time of incorporation, such dealer shall pay tax at the

rate of 12.5% on the total consideration received or receivable subject to such deductions as may be prescribed; b) Any dealer executing any works contracts for the Government or local authority may opt to pay tax by way of composition at the rate of 4% on the total value of the contract executed for the Government or local authority and in such cases, the tax at 4% shall be collected at source by such contractee and remitted to Government in such manner as may be prescribed; c) Any dealer executing works contracts other than for Government and local authority may opt to pay tax by way of composition at the rate of 4% *{...} of the total consideration received or receivable for any specific contract subject to such conditions as may be prescribed; d) Any dealer engaged in construction and selling of residential apartments, houses, buildings or commercial complexes may opt to pay tax by way of composition at the rate of 4% of twenty five percent (25%) of the consideration received or receivable or the market value fixed for the purpose of stamp duty whichever is higher subject to such conditions as may be prescribed; e) any dealer having opted for composition under clauses (b),

1. (c) and (d), purchases or receives any goods from outside the State or India or from any dealer other than a Value Added Tax dealer in the State and uses such

goods in the execution of the works contracts, such dealer shall pay tax on

such goods at the rates applicable to them under the Act and the value of such goods shall be excluded for the purpose of computation of turnover on which tax by way of composition at the rate of four percent (4%) is payable.; f) Any dealer who is liable to be registered for TOT and executing any works contracts shall pay tax at the rate of 1% on total value of the goods at the time of incorporation of the goods used: Provided that where accounts are not maintained to determine the correct value of the goods at the time of incorporation, such dealers shall pay tax at the rate of 1% on the total consideration received or receivable subject to such deductions as may be prescribed. Provided further that no tax shall be payable under this sub-section on the turnover relating to the consideration received as a sub-contractor if the main contractor opted to pay tax by way of composition subject to the condition that the sub-contractor shall pay tax in respect of any goods purchased or received from outside the State of India or from any person other than a Value Added Tax dealer in the State on the value of such goods at the rates applicable to them under the Act.

1. (8) Every VAT dealer who transfers the right to use goods taxable under the Act for any purpose whatsoever, whether or not for a specified period, to any lessee or licensee for cash, deferred payment or other valuable consideration, in the course of his business shall, on the total amount realized or realizable by him by way of payment in cash or otherwise on such transfer of right to use such goods from the lessee or licensee pay a tax for such goods at the rates specified in the Schedules.
2. (9) notwithstanding anything contained in the Act, every dealer running any restaurant, eating house, catering establishment, hotel, coffee shop, sweet shop or any establishment by whatever name called and any club, who supplies by way of or as part of any services or in any other manner whatsoever of goods being food or any other article for human consumption or drink shall pay tax at the rate of twelve and half percent (12.5%) on sixty percent (60%) of the taxable turnover, if the taxable turnover in a period of preceding twelve months exceeds Rs.5,00,000/- (Rupees five lakhs) or in the preceding three months exceeds Rs.1,25,000/- (Rupees one lakh twenty five thousand).

Nothing contained in the Act shall be deemed to impose or authorize the imposition of a tax on the sale or purchase of any goods, where such sale or purchase takes place:

territory of India; or

c) in the course of inter-State trade or commerce.

Explanation: - The provisions of Chapter II of the Central Sales Tax Act, 1956,

shall apply for the purpose of determining when a sale or purchase takes place

in the course of inter-State trade or commerce or outside a State or in the course of import or export.

Where goods sold or purchased are contained in containers or are packed in any packing material liable to tax under the Act, the rate of tax applicable to such containers or packing material shall, whether the price of the containers or packing material is charged for separately or not, be the same as the rate of tax applicable to such goods so contained or packed, and where such goods sold or purchased are exempt from tax under the Act, the containers or packing material shall also be exempted.

The goods listed in Schedule I to the Act shall be exempted from tax under the Act.

Subject to the conditions in Sections 9 and 13 of the Act, the following shall be zero- rated sales for the purpose of the Act and shall be eligible for input tax credit:

1. (a) Sale of taxable goods in the course of inter-state trade and commerce falling within the scope of Section 3 of the Central Sales Tax Act, 1956;
2. (b) Sale of goods falling within the scope of sub sections

1. (1) and
2. (3) of Section 5 of the Central Sales Tax Act 1956;
   • (c) Sale of goods to any unit located in Special Economic Zone.

Every dealer, who is liable to pay tax on the sale of goods specified in Schedule VI, shall be eligible for input tax credit subject to the conditions in Section 13 of the Act and in the manner prescribed.

1. (1) Any dealer who is not registered or does not opt to be registered as VAT dealer shall not be entitled to claim input tax credit for any purchase, and shall not be eligible to issue a tax invoice.
2. (2) Any dealer who is registered as a VAT dealer shall not be liable to Turnover

Calculation of tax payable

1. (1) Subject to sub-section (2), the VAT payable on a sale liable to VAT shall be calculated by applying the rate of tax specified in the Schedules, on the sale price of goods.
2. (2) Where the sale price of goods is inclusive of VAT, the amount of VAT shall be determined in accordance with the formula prescribed.
3. (3) Where a dealer is liable to pay turnover tax under sub-section
4. (2) of Section 4, the tax shall be calculated by applying the rate of Turnover Tax specified therein on the taxable turnover.

The VAT payable by a VAT dealer or VAT credit or refund due to a VAT dealer for a tax period shall be calculated in accordance with the formula prescribed.

1. (1) Subject to the conditions if any, prescribed, an input tax credit shall be allowed to the VAT dealer for the tax charged in respect of all purchases of taxable goods, made by that dealer during the tax period, if such goods are for use in the business of the VAT dealer. No input tax credit shall be allowed in respect of the tax paid on the purchase of goods specified in Schedule VI. (2)
   • (a) A dealer registered as a VAT dealer on the date of commencement of the Act, shall be entitled to claim for the sales tax paid under Andhra Pradesh General Sales Tax Act, 1957 on the stocks held in the State on the date of commencement of the Act subject to the conditions and in the manner as may be prescribed: Provided that such goods should have been purchased from 01-04-2004 to 31-03-2005 and are goods eligible for input tax credit.
   • (b) Subject to the conditions if any, prescribed, input tax credit shall be allowed to a VAT dealer on registering as VAT dealer if any input tax is paid or payable in respect of all purchases of taxable goods, where such goods are for use in the business as VAT dealer, provided the goods are in stock on the effective date of registration and such purchase occurred not more than three months prior to such date of registration.
2. (3) A VAT dealer shall be entitled to claim :-
   • (a) input tax credit under sub-section (1), on the date the goods are received by him, provided he is in possession of a tax invoice;
   • (b) input tax credit or sales tax credit under sub-section (2), on the date of registration, provided he is in possession of documentary evidence therefor.
3. (4) A VAT dealer shall not be entitled for input tax credit or sales tax credit in respect of the purchases of such taxable goods as may be prescribed.
4. (5) No input tax credit shall be allowed on the following:
   • (a) works contracts where the VAT dealer pays tax under the provisions of clauses (b),(c) and
   • (d) of sub-section
5. (7) of Section4;
   • (b) transfer of a business as a whole;
   • (c) sale of exempted goods except when such goods are sold in the course of export or exported outside the territory of India;
   • (d) exempt sale;
   • (e) transfer of exempted goods on consignment basis or to branches of the VAT dealer outside the State otherwise than by way of sale;
   • (f) (.......) omitted (Clause
   • (f) which reads as “supply of goods by the VAT dealer as mentioned in sub-section
6. (9) of Section 4” is omitted by Act No 10 of 2006 dated 4th January 2006, w.e.f 1-12-2005)
7. (6) The input tax credit for transfer of taxable goods outside the State by any VAT dealer otherwise than by way of sale shall be allowed for the amount of tax in excess of 4%.
8. (7) Where any VAT dealer pays tax under clause
   • (a) of sub-section
9. (7) of Section 4, the input tax credit shall be limited to 90% of the related input tax.
10. (8) Where goods purchased by a VAT dealer are partly for his business use and partly for other than his business use, the amount of the input tax credit shall be limited to the extent of input tax that relates to the goods used in his business.
11. (9) A Turnover Tax dealer or a casual trader shall not be entitled to claim input tax credit.
12. (10) Any dealer covered by Explanation III & IV of clause
13. (10) of Section 2 shall not be eligible for input tax credit against or relatable to sale of un-serviceable goods or scrap, surplus, old, obsolete or discarded material or waste products whether by auction or otherwise.
14. (11) Any VAT dealer who purchases any taxable goods from a dealer covered under sub-section
15. (10) above, shall be eligible for input tax credit, on production of documentary evidence that tax has been charged.

A VAT dealer making a sale liable to tax to another VAT dealer shall issue at the time of sale, a tax invoice in such form as may be prescribed.

1. (1) The Government may, if it is necessary so to do in the public interest and subject to such conditions as it may impose, by a notification, provide for grant of refund of tax paid to any person, on the purchases effected by him and specified in the said notification.
2. (2) Any notification under sub section
3. (1) may be issued so as to be retrospective to any day not earlier than the appointed day and such notification shall take effect from the date of its publication in the Gazette or such other earlier or later date as may be mentioned therein.
4. (3) An application for refunds shall be made in duplicate to the Commissioner within a period of six months from the date of purchase or as the Government may prescribe in the notification and it shall be accompanied by the purchase invoice in original.

1. (1) The burden of proving that any sale or purchase effected by a dealer is not liable to any tax or is liable to be taxed at a reduced rate or eligible for input tax credit shall lie on the dealer.
2. (2) Where a dealer issues or produces a false bill, voucher, declaration, certificate

or other document with a view to support or make any claim that a transaction

of sale or purchase effected by him or any other dealer, is not liable to tax or liable to be taxed at a reduced rate, or eligible for input tax credit is guilty of an offence under Section 55 of the Act.